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https://www.courtlistener.com/api/rest/v3/opinions/4555641/	Nebraska Supreme Court Online Library www.nebraska.gov/apps-courts-epub/ 08/14/2020 08:08 AM CDT - 20 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 J.S, appellant, v. Nebraska Department of Health and Human Services et al., appellees. ___ N.W.2d ___ Filed June 5, 2020. No. S-18-1149. 1. Public Assistance: Words and Phrases. For the purposes of state or local public benefits eligibility under Neb. Rev. Stat. § 4-108 (Reissue 2012), “lawfully present” means the alien classifications under 8 U.S.C. § 1621(a)(1), (2), and (3) (2012). 2. Public Assistance: Legislature. In order to affirmatively provide a state public benefit to aliens not lawfully present in the United States, as authorized by 8 U.S.C. § 1621(d) (2012), the Legislature must make a positive or express statement extending eligibility by reference to immi- gration status. 3. Administrative Law: Judgments: Appeal and Error. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modi- fied by an appellate court for errors appearing on the record. 4. ____: ____: ____. When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is sup- ported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. 5. Administrative Law: Judgments. Whether an agency decision con- forms to the law is by definition a question of law. 6. Administrative Law: Statutes: Appeal and Error. The meaning and interpretation of statutes and regulations are questions of law for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. 7. Medical Assistance: Federal Acts: States. The Medicaid program provides joint federal and state funding of medical care for individuals - 21 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 whose resources are insufficient to meet the cost of necessary medi- cal care. 8. ____: ____: ____. A state is not obligated to participate in the Medicaid program; however, once a state has voluntarily elected to participate, it must comply with standards and requirements imposed by federal stat- utes and regulations. 9. Administrative Law: Statutes. For purposes of construction, a rule or regulation of an administrative agency is generally treated like a statute. 10. ____: ____. Properly adopted and filed regulations have the effect of statutory law. 11. Administrative Law. Absent a statutory or regulatory indication to the contrary, language contained in a rule or regulation is to be given its plain and ordinary meaning. 12. Federal Acts: Words and Phrases. In interpreting federal statutes, the word “may” customarily connotes discretion. That connotation is par- ticularly apt where “may” is used in contraposition to the word “shall.” 13. Statutes: Words and Phrases. The word “may” when used in a statute will be given its ordinary, permissive, and discretionary meaning unless it would manifestly defeat the statutory objective. 14. Medical Assistance: Federal Acts: States. Because Nebraska did not elect to extend coverage under 42 U.S.C. § 1396b(v)(4)(A) (2018) beyond age 18, neither the Children’s Health Insurance Program nor the former foster care provisions of the Patient Protection and Affordable Care Act provide coverage where a noncitizen applicant’s immigration status is not qualified. 15. Statutes: Appeal and Error. Statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to inter- pretation to ascertain the meaning of statutory words which are plain, direct, and unambiguous. 16. Statutes: Words and Phrases. It is not for the courts to supply missing words or sentences to a statute to supply that which is not there. 17. Statutes: Legislature: Presumptions. In enacting a statute, the Legislature must be presumed to have knowledge of all previous legisla- tion upon the subject. 18. ____: ____: ____. The Legislature is presumed to know the general condition surrounding the subject matter of the legislative enactment, and it is presumed to know and contemplate the legal effect that accom- panies the language it employs to make effective the legislation. 19. Constitutional Law. Nebraska’s separation of powers clause prohibits the three governmental branches from exercising the duties and preroga- tives of another branch. - 22 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 20. ____. The separation of powers clause prevents a branch from delegat- ing its own duties or prerogatives except as the constitution directs or permits. 21. Constitutional Law: Legislature: Courts: Appeal and Error. The Nebraska Supreme Court does not sit as a superlegislature to review the wisdom of legislative acts; that restraint reflects the reluctance of the judiciary to set policy in areas constitutionally reserved to the Legislature’s plenary power. Appeal from the District Court for Lancaster County: Kevin R. McManaman, Judge. Affirmed. Allison Derr, Robert McEwen, and Sarah Helvey, of Nebraska Appleseed Center for Law in the Public Interest, for appellant. Douglas J. Peterson, Attorney General, and Ryan C. Gilbride for appellees. Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ. Cassel, J. I. INTRODUCTION In E.M. v. Nebraska Dept. of Health & Human Servs. (E.M.), 1 we held that legislation 2 creating the bridge to inde- pendence program (B2I) 3 did not “affirmatively provide[]” 4 eligibility to noncitizen applicants who were not “lawfully present.” 5 In this Administrative Procedure Act 6 appeal, J.S., 1 E.M. v. Nebraska Dept. of Health & Human Servs., ante p. ___, ___ N.W.2d ___ (2020). 2 See Neb. Rev. Stat. §§ 43-4501 to 43-4514 (Reissue 2016, Cum. Supp. 2018 & Supp. 2019) (Young Adult Bridge to Independence Act). 3 See § 43-4503(1). 4 See 8 U.S.C. § 1621(d) (2012). 5 See id. 6 See Neb. Rev. Stat. §§ 84-901 to 84-920 and 84-933 to 84-948 (Reissue 2014 & Cum. Supp. 2018). - 23 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 a noncitizen who was admitted into B2I, challenges the dis- trict court’s judgment affirming a state agency’s denial of Medicaid 7 eligibility after she reached age 19. Essentially, we must decide whether the statutes or regulations she cites autho- rized her participation despite her immigration status and age. Because they did not, we affirm the judgment. II. BACKGROUND 1. B2I In E.M., 8 we briefly introduced B2I, Nebraska’s extended foster care program, which was created by the Young Adult Bridge to Independence Act (YABI). 9 In this appeal, we rely upon that description. 2. PRWORA and L.B. 403 Similarly, in E.M., 10 we extensively discussed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) 11 and its Nebraska counterpart. 12 As we explained there, PRWORA declared certain individuals to be ineligible for any state public benefit. 13 Like PRWORA’s pro- hibition on federal public benefits, 14 its proscription on state public benefits applies “[n]otwithstanding any other provision of law” 15 but with specified exceptions. 16 [1,2] There, we focused on the exception created by § 1621(d), which authorized a State to make an “alien who is 7 See Neb. Rev. Stat. § 68-903 (Reissue 2018) (medical assistance program “shall also be known as [M]edicaid”). 8 E.M., supra note 1. 9 See §§ 43-4501 to 43-4514. 10 E.M., supra note 1. 11 Pub. L. No. 104-193, § 1, 110 Stat. 2105. 12 See Neb. Rev. Stat. §§ 4-108 to 4-113 (Reissue 2012 & Cum. Supp. 2018). 13 See § 1621(a). 14 See 8 U.S.C. § 1611 (2012). 15 § 1621(a). 16 See § 1621(b) and (d). - 24 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 not lawfully present in the United States” eligible for a State public benefit by enactment of a State law which “affirma- tively provides for such eligibility.” First, we determined that for the purposes of state or local public benefits eligibility under § 4-108, “lawfully present” means the alien classifi- cations under § 1621(a)(1), (2), and (3). 17 Second, we held that in order to affirmatively provide a state public benefit to aliens not lawfully present in the United States, as autho- rized by § 1621(d), the Legislature must make a positive or express statement extending eligibility by reference to immi- gration status. 18 3. J.S. and DHHS J.S. is a citizen of El Salvador, who fled to Nebraska as a minor. She was adjudicated in juvenile court 19 and placed into foster care. At the time she applied to the Nebraska Department of Health and Human Services (DHHS) for B2I, she had a pending application for special immigrant juvenile (SIJ) status. Upon turning 19 years old, J.S. was accepted into B2I but was denied Medicaid coverage after her 19th birthday. She requested a fair hearing with DHHS. At the hearing, the parties presented evidence and made arguments. In DHHS’ order, it found that she did not meet “the basic requirement[s] of ‘citizenship or alien status’ required for all Medicaid recipi- ents.” It upheld the denial of Medicaid benefits. 4. District Court J.S. filed a timely petition for review in the district court. She argued that she was eligible for Medicaid under the Children’s Health Insurance Program (CHIP) 20 and former foster care. 21 17 E.M., supra note 1. 18 Id. 19 See Neb. Rev. Stat. § 43-247(3)(a) (Reissue 2016). 20 See Neb. Rev. Stat. § 68-969(2)(a) (Reissue 2018) (“CHIP means the Children’s Health Insurance Program established pursuant to 42 U.S.C. [§] 1397aa et seq.”). 21 See 42 U.S.C. § 1396a(a)(10)(A)(i)(IX) (2018). - 25 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 She also contended that B2I extended medical assistance to all young adults regardless of immigration status. The district court disagreed that CHIP or former foster care supported Medicaid eligibility. The court reasoned: Congress allowed the states to provide Medicaid benefits to certain law- fully residing alien children under CHIP, a state could elect to extend benefits to individuals under 21 years old (and pregnant women) who are “lawfully residing” aliens, 22 but Nebraska chose to limit CHIP to children under 19 years old (and preg- nant women). Thus, the court concluded that even though J.S. was considered lawfully residing as defined by CHIP regula- tions, she exceeded the age limitation when she reached her 19th birthday. The court then considered whether J.S. could receive Medicaid under B2I. That program provides several services to participants, including “[m]edical care under the medical assistance program for young adults who met the eligibil- ity requirements of [§] 43-4504 and have signed a voluntary services and support agreement as provided in [§] 43-4506.” 23 The court acknowledged that § 1621(a) declared aliens who are not qualified aliens, nonimmigrants, or paroled into the United States for less than 1 year ineligible for State or local public benefits. And the court recognized that § 1621(d) authorized an exception where a state law affirmatively pro- vided for such eligibility. The court concluded that because the Nebraska Legislature did not affirmatively provide for unlawful aliens to receive Medicaid benefits under B2I, J.S. was not entitled to Medicaid benefits. The court noted that whether J.S. should have been accepted into B2I was not before the court. The court affirmed DHHS’ denial of Medicaid benefits. J.S. filed a timely appeal, and we later granted her petition to bypass the Nebraska Court of Appeals. 24 22 See 42 U.S.C. § 1396b(v)(4)(A) (2018). 23 § 43-4505(1). 24 See Neb. Ct. R. App. P. § 2-102(B) (rev. 2015). - 26 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 III. ASSIGNMENTS OF ERROR J.S. assigns, reordered, that the district court erred in (1) affirming DHHS’ denial of Medicaid benefits, (2) determining that citizenship or immigration status was relevant to eligibility for medical coverage for participants in B2I, and (3) failing to determine that DHHS’ practice of denying medical coverage to participants in B2I due to alien status violated the separation of powers clause of the Nebraska Constitution. IV. STANDARD OF REVIEW [3-5] A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record. 25 When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evi- dence, and is neither arbitrary, capricious, nor unreasonable. 26 Whether an agency decision conforms to the law is by defini- tion a question of law. 27 [6] The meaning and interpretation of statutes and regula- tions are questions of law for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. 28 V. ANALYSIS 1. Medicaid Participation [7,8] The Medicaid program provides joint federal and state funding of medical care for individuals whose resources are insufficient to meet the cost of necessary medical care. 29 A 25 McManus Enters. v. Nebraska Liquor Control Comm., 303 Neb. 56, 926 N.W.2d 660 (2019). 26 Id. 27 Id. 28 In re Application No. OP-0003, 303 Neb. 872, 923 N.W.2d 653 (2019). 29 In re Estate of Vollmann, 296 Neb. 659, 896 N.W.2d 576 (2017). - 27 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 state is not obligated to participate in the Medicaid program; however, once a state has voluntarily elected to participate, it must comply with standards and requirements imposed by fed- eral statutes and regulations. 30 DHHS concedes that Nebraska has “elected to participate in the Medicaid program” 31 through enactment of the Medical Assistance Act. 32 But it argues that it properly determined J.S. was not eligible under the applicable statutes and regulations. Challenging the district court’s judgment affirming DHHS’ denial of Medicaid eligibility, J.S. makes three arguments: First, she argues that neither CHIP nor former foster care conditions Medicaid eligibility on immigration status. Second, she contends that B2I extends Medicaid coverage to all young adults in B2I and that although she would be ineligible for federal matching funds, the State should furnish medical care with state funds only. Finally, she asserts that DHHS’ practice of denying Medicaid to unlawful aliens participat- ing in B2I violated the separation of powers clause of the Nebraska Constitution. 33 We note that in this court, as in the court below, the parties do not question J.S.’ participation in B2I; they contest only her eligibility for Medicaid benefits. Therefore, we are concerned only with whether J.S. is eligible for Medicaid under the Medical Assistance Act and § 43-4505(1). Before turning to the arguments, we note that we will refer to the “Medicaid state plan.” 34 This is a “comprehensive written document, developed and amended by [DHHS] and approved by the federal Centers for Medicare and Medicaid Services, which describes the nature and scope of the medi- cal assistance program and provides assurances that [DHHS] 30 Id. 31 Brief for appellee at 20-21. 32 See Neb. Rev. Stat. §§ 68-901 to 68-994 (Reissue 2018 & Supp. 2019). 33 See Neb. Const. art. II, § 1. 34 See § 68-907(4). - 28 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 will administer the program in compliance with federal requirements.” 35 2. Medicaid Eligibility Via CHIP or Former Foster Care J.S. concedes that PRWORA “generally restricts immigrants’ rights to receive federal, state, and local public benefits,” that it “limits the receipt of federally reimbursed Medicaid to only U.S. citizens or ‘qualified aliens,’” and that it “imposes a five-year waiting period,” which, in combination, effectively permits noncitizens, nonqualified aliens, and qualified aliens subject to the waiting period to “only receive medical coverage for the treatment of emergency medical conditions, even as to children and pregnant women.” 36 Nevertheless, J.S. argues that she was eligible for Medicaid under CHIP and former foster care. Before addressing her spe- cific arguments, we review the regulations adopted by DHHS to administer the Medicaid program in Nebraska. (a) DHHS Regulations [9-11] The Medical Assistance Act requires DHHS to “administer the [Medicaid] program” 37 and empowers it to “adopt and promulgate rules and regulations.” 38 For pur- poses of construction, a rule or regulation of an administra- tive agency is generally treated like a statute. 39 Properly adopted and filed regulations have the effect of statutory law. 40 Absent a statutory or regulatory indication to the contrary, language contained in a rule or regulation is to be given its plain and ordinary meaning. 41 DHHS’ regulations governing 35 Id. 36 Brief for appellant at 14, 15. 37 § 68-908(1). 38 § 68-908(2). 39 McManus Enters., supra note 25. 40 Id. 41 Id. - 29 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 Medicaid eligibility are codified in title 477 of the Nebraska Administrative Code. J.S. did not meet Medicaid’s primary eligibility requirements under title 477. One “Primary Eligibility Requirement[]” is “U.S. citizenship or alien status.” 42 “In order to be eligible for Medicaid, an individual’s status must be documented as one of the following . . . [a] citizen of the United States; [or a] Qualified Alien[] . . . .” 43 Within this regulation, a numbered list from 2 to 4 specifies criteria for an “individual’s status,” 44 but none apply to J.S. Despite not meeting the primary eligibility requirements, J.S. contends that she is eligible for Medicaid, because, she argues, a “lawfully present” child exception applied under both CHIP and former foster care. We examine each category in turn. (b) CHIP “CHIP means the Children’s Health Insurance Program established pursuant to 42 U.S.C. [§] 1397aa et seq.” 45 A regulation in effect at the time of J.S.’ application and the pro- ceedings below stated, in relevant part, as follows: “Children’s Health Insurance Program (CHIP): Children age 18 or younger . . . are eligible for CHIP . . . .” 46 J.S. argues that in 2009, “Congress created an exception to PRWORA in its enactment of [§] 214” 47 of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA). 48 The federal statute, as codified, states, “A State may elect (in a plan amendment under this subchapter) to 42 See 477 Neb. Admin. Code, ch. 2, § 001 (2014). 43 477 Neb. Admin. Code, ch. 5, § 001 (2014). 44 Id. 45 § 68-969(2). 46 477 Neb. Admin. Code, ch. 18, § 003.01 (2014). 47 Brief for appellant at 15. 48 Pub. L. No. 111-3, § 1, 123 Stat. 8. - 30 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 provide medical assistance . . . , notwithstanding [specified sections of PRWORA], to children . . . who are lawfully resid- ing in the United States . . . , within . . . the following eligi- bility categor[y]: . . . (ii) . . . Individuals under 21 years of age . . . .” 49 [12,13] But, as the district court correctly determined, § 1396b(v)(4)(A) was permissive and not mandatory, and Nebraska did not extend Medicaid eligibility under § 1396b(v)(4)(A) beyond those persons age 18 years and younger. In interpreting federal statutes, the word “may” customarily connotes discretion. That connotation is particu- larly apt where “may” is used in contraposition to the word “shall.” 50 Similarly, we have said: The word “may” when used in a statute will be given its ordinary, permissive, and discre- tionary meaning unless it would manifestly defeat the statutory objective. 51 Here, the word “may” afforded the State a choice: to “elect” or not. 52 As DHHS points out, the age of majority in Nebraska is 19. 53 Although the age-of-majority statute has been amended twice since the proceedings below, neither amend- ment applies here. 54 DHHS argues, “In its Medicaid State Plan, the State of Nebraska chose to limit such eligibility to lawfully residing children under [age 19].” 55 And J.S. concedes that DHHS “correctly point[s] out that although Nebraska elected to provide Medicaid to lawfully residing children through [§] 214, it only elected to do so in its State Plan up to age nineteen, rather than twenty-one.” 56 49 § 1396b(v)(4)(A) (emphasis omitted). 50 See Jama v. Immigration and Customs Enforcement, 543 U.S. 335, 125 S. Ct. 694, 160 L. Ed. 2d 708 (2005). 51 Holloway v. State, 293 Neb. 12, 875 N.W.2d 435 (2016). 52 See § 1396b(v)(4)(A). 53 See Neb. Rev. Stat. § 43-2101 (Reissue 2016). 54 See, 2018 Neb. Laws, L.B. 982, § 1; 2019 Neb. Laws, L.B. 55, § 5. 55 Brief for appellee at 26. 56 Reply brief for appellant at 4. - 31 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 CHIP provides no support for J.S.’ claim. J.S. was 19 years old when she was denied Medicaid. Once she reached age 19, she was no longer eligible for Medicaid under CHIP. We now turn to her argument regarding former foster care. (c) Former Foster Care J.S. argues that DHHS “must provide coverage to all eligible individuals under mandatory categories of the federal Medicaid program, including the Former Foster Care Category” 57 of the Patient Protection and Affordable Care Act (ACA). 58 She cites the eligibility criteria of § 1396a(a)(10)(A)(i)(IX), including age, enrollment status, having been in foster care, and hav- ing been enrolled in a state plan or under a waiver of a plan while in foster care. She argues, “Aside from her citizenship status, it is undisputed that [she] met all of the basic eligibility requirements . . . .” 59 She then argues that “under [§] 214 of CHIPRA, she became entitled to receive Medicaid under the Former Foster Care Category.” 60 DHHS responds that because J.S. was not a U.S. citizen or qualified alien, she did not qualify as a former foster care child under § 1396a(a)(10)(A)(i)(IX) after she reached the age of majority, i.e., age 19. “Under the former foster care child exemption,” DHHS argues, “[J.S.] still must meet the basic eligibility requirements, including [U.S.] citizenship or eligible alien status.” 61 DHHS then argues that although the State could have elected under CHIPRA to provide federal Medicaid to pending SIJ applicants under age 21, it did not do so in its Medicaid state plan. In reply, J.S. concedes that DHHS is “correct in saying ‘Nebraska is not required to provide federal Medicaid to [SIJ 57 Brief for appellant at 21. 58 See Pub. L. No. 111-148, § 1, 124 Stat. 119. 59 Brief for appellant at 21. 60 Id. at 22. 61 Brief for appellee at 26. - 32 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 status] applicants under the age of 21.’” 62 And thereafter, her argument rests solely on YABI. Thus, she implicitly con- cedes that § 1396b(v)(4)(A)—the codification of § 214 of CHIPRA 63—does not by itself overcome her immigration sta- tus after age 19. It could not do so, DHHS correctly argues, because Nebraska did not elect to extend medical assistance under § 1396b(v)(4)(A) past age 18. At the fair hearing before DHHS, one of the exhibits received without objection purported to be a response from the federal Centers for Medicare and Medicaid Services, responding to a Nebraska inquiry. The answer stated, in relevant part, “[f]ormer foster children who are age 19 or older and have an immigra- tion status that is considered lawfully present but is not con- sidered to be ‘qualified’ would not be eligible for full Medicaid coverage, unless the individual was a pregnant woman.” This merely confirms J.S.’ implicit concession. [14] In summary, because Nebraska did not elect to extend coverage under § 1396b(v)(4)(A) beyond age 18, neither CHIP nor the former foster care provisions of the ACA pro- vide coverage where a noncitizen applicant’s immigration status is not qualified. We now turn to J.S.’ argument based on YABI. 3. Medicaid Eligibility Via B2I Under YABI In E.M., 64 we addressed YABI and B2I, which extend serv ices and support to former foster youth who are between 19 and 21 years old. 65 But, here, we must specifically consider § 43-4505(1), which we did not address directly in E.M. Under § 43-4505, “[e]xtended services and support provided under [B2I] include, but are not limited to: (1) Medical care 62 Reply brief for appellant at 4. 63 Pub. L. No. 111-3, § 214, 123 Stat. 56. 64 E.M., supra note 1. 65 See §§ 43-4504 and 43-4505. - 33 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 under the medical assistance program for young adults who meet the eligibility requirements of section 43-4504 and have signed a voluntary services and support agreement as provided in section 43-4506.” (a) Principles of Statutory Interpretation [15,16] The same principles of statutory interpretation we employed in E.M. apply here. Statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to interpretation to ascertain the meaning of statutory words which are plain, direct, and unambiguous. 66 It is not for the courts to supply missing words or sentences to a statute to supply that which is not there. 67 (b) PRWORA Applies to YABI In E.M., we reached several conclusions that direct our rea- soning here: (1) PRWORA and its Nebraska equivalent apply to B2I, (2) YABI could not be extended by omission to aliens not lawfully present in the United States, (3) PRWORA instead required a positive or express statement by reference to immi- gration status, and (4) YABI lacks any such statement. 68 J.S. raises two arguments identical to contentions rejected in E.M. Once again, neither is persuasive. First, she says that YABI “makes no mention of citizenship as a prerequisite to receiving medical care within extended foster care” and that neither §§ 43-4504 or 43-4505(1) “limit the availability . . . to non-qualified aliens, or give deference to PRWORA.” 69 But this is merely the “omission” argument that we rejected in E.M. There, we held, the omission of a law- ful presence requirement in YABI did not qualify as a positive 66 JB & Assocs. v. Nebraska Cancer Coalition, 303 Neb. 855, 932 N.W.2d 71 (2019). 67 State v. Jedlicka, ante p. 52, 938 N.W.2d 854 (2020). 68 See E.M., supra note 1. 69 Brief for appellant at 18. - 34 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 or express statement extending eligibility by reference to immi- gration status. 70 Second, J.S. points to the same case management service 71 we addressed in E.M. There, we observed that this subsection describes a service and not a recipient eligible by immigration status. Under PRWORA, in order for a noncitizen not “law- fully present” to receive a state public benefit, the Legislature was required to “affirmatively provide[]” for such eligibil ity. 72 In rejecting the same argument there, we observed that no such statement appeared anywhere in YABI. Here, as we did in E.M., we decline to supply words left out by the Legislature. (c) § 43-4505(1) To escape the reach of PRWORA, J.S. argues that the “pas- sage of [YABI] constituted a ‘[m]aterial change[] in State law’ requiring [DHHS] to amend its State Plan to carry out the Legislature’s mandate to provide medical care to all children within B2I,” including noncitizens having pending SIJ applica- tions. 73 This argument relies upon a federal regulation, which states, “The [Medicaid state] plan must provide that it will be amended whenever necessary to reflect . . . (ii) Material changes in State law . . . .” 74 DHHS responds that the passage of YABI did not require the State to amend its Medicaid state plan. Instead, DHHS con- tends that YABI must be read in conjunction with PRWORA 75 and its Nebraska counterpart. 76 DHHS points out that YABI does not affirmatively provide for Medicaid coverage to 70 See E.M., supra note 1. 71 See § 43-4505(3)(h). 72 See § 1621(d). 73 Brief for appellant at 17. 74 42 C.F.R. § 430.12(c)(1)(ii) (2010). 75 See § 1621(d). 76 See § 4-108. - 35 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 a noncitizen who is not “lawfully present” as defined by PRWORA. And DHHS suggests that the Legislature was familiar with these prior statutes. We agree with DHHS. [17,18] In enacting a statute, the Legislature must be pre- sumed to have knowledge of all previous legislation upon the subject. 77 The Legislature is also presumed to know the gen- eral condition surrounding the subject matter of the legislative enactment, and it is presumed to know and contemplate the legal effect that accompanies the language it employs to make effective the legislation. 78 And, as we recognized in E.M., the Legislature knows how to affirmatively provide for noncitizens to receive public benefits. 79 Section 43-4505 first came into law in 2013. 80 It was amended in 2014 81 and 2015. 82 In none of this legislation was there any language affirmatively providing for public benefits to noncitizens. And although each of these legislative acts directed DHHS to submit plan amendments, 83 J.S. has not pointed to anything in these plan amendments or associated federal statutes excepting B2I from PRWORA or § 4-108. Moreover, J.S.’ argument claiming that § 43-4505 was a material change in state law would duplicate the former foster care category and conflict with the ACA. In 2010, the ACA required the States to provide Medicaid coverage to youth who have aged out of foster care until they turn 26 years old. 84 77 In re Estate of Psota, 297 Neb. 570, 900 N.W.2d 790 (2017). 78 Stewart v. Nebraska Dept. of Rev., 294 Neb. 1010, 885 N.W.2d 723 (2016). 79 See E.M., supra note 1. 80 See 2013 Neb. Laws, L.B. 216, § 5 (as part of what was then known as Young Adult Voluntary Services and Support Act). 81 See 2014 Neb. Laws, L.B. 853, § 34. 82 See 2015 Neb. Laws, L.B. 243, § 17. 83 See, 2013 Neb. Laws, L.B. 216, § 14; 2014 Neb. Laws, L.B. 853, § 44; 2015 Neb. Laws, L.B. 243, § 24. 84 See § 1396a(a)(10)(A)(i)(IX). - 36 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 In compliance with federal law, Nebraska amended its State plan and provided for former foster youth to receive Medicaid until they turned 26 years old. 85 At the time J.S. applied for Medicaid, the former foster care category existed and did not require an amendment to the State plan. J.S.’ construc- tion would effectively limit former foster care recipients of Medicaid only to those participating in B2I and reduce the age limit from 26 to 21 years. Because the state Medicaid plan already covered former foster care youth, § 43-4505(1) was not a material change in state law. 4. Separation of Powers J.S. contends that DHHS’ “practices and regulations limiting non-qualified aliens’ ability to receive medical coverage despite their presence in B2I” 86 violates the separation of powers clause of the Nebraska Constitution. 87 Thus, she claims, DHHS has encroached on the prerogatives of the Legislature. [19,20] Nebraska’s separation of powers clause prohibits the three governmental branches from exercising the duties and prerogatives of another branch. 88 The separation of powers clause prevents a branch from delegating its own duties or pre- rogatives except as the constitution directs or permits. 89 [21] But as DHHS responds, the Legislature passed § 4-108, which provides that “[n]otwithstanding any other provisions of law, unless exempted . . . pursuant to federal law, no state agency . . . shall provide public benefits to a person not law- fully present in the United States.” If the Legislature intended that nonqualified aliens were to receive Medicaid, it could easily have included language to that effect in YABI. The Nebraska Supreme Court does not sit as a superlegislature to 85 477 Neb. Admin. Code, ch. 28, § 003 (2018). 86 Brief for appellant at 24. 87 See Neb. Const. art. II, § 1. 88 In re Interest of A.M., 281 Neb. 482, 797 N.W.2d 233 (2011). 89 Id. - 37 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports J.S. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 20 review the wisdom of legislative acts; that restraint reflects the reluctance of the judiciary to set policy in areas constitu- tionally reserved to the Legislature’s plenary power. 90 DHHS did not violate the separation of powers clause in denying J.S. Medicaid. VI. CONCLUSION We conclude that the district court did not err in determining that J.S. was not eligible for Medicaid. We affirm the judgment of the district court. Affirmed. 90 Nebraska Coalition for Ed. Equity v. Heineman, 273 Neb. 531, 731 N.W.2d 164 (2007).	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/3522582/	The will of Margaret Spencer Nichols, deceased, was proven and admitted to probate in Callaway County on December 31, 1920. Item or clause 3 of the will follows: "And lastly, all the rest, residue and remainder of my estate whatsoever, real, personal and mixed, and wherever situated, I give, devise and bequeath to J.W. Ratekin, as Trustee, to have and to hold the same for my son, Noah Harry Nichols, for his natural like and I hereby direct that the said J.W. Ratekin, as trustee, shall have the right to convert to cash any of my real estate. I further direct that should the income from my estate be insufficient to support and maintain Page 490 my son, Noah Harry Nichols, that the said J.W. Ratekin is authorized to use for the support of the said Noah Harry Nichols, one-half the value of my estate at my death or any part of said one-half. And at the death of the said Noah Harry Nichols, my estate is to be divided one-half of the value of my estate at the time of my death to my granddaughter, Margaret Lovegreen, to have and to hold, to her and her heirs forever. To my grandson, James Stanley Nichols, and my granddaughter, Gladys Long Banta, to have and to hold to them and their heirs forever, the other one-half of my estate which may be left at the death of my son, Noah Harry Nichols, or such part of said one-half as has not been expended for the support of my son, Noah Harry Nichols." The estate of decedent was administered and final settlement thereof made in May, 1922, at which time the property in the estate of the estimated value of $8157.58 was delivered to J.W. Ratekin, the trustee named in the will. Noah Harry Nichols, son of testatrix, died February 22, 1932. Thereafter, said trustee presented to the Circuit Court of Callaway County his petition, stating therein the manner in which he had performed the trust, the amounts received and disbursed, and prayed the court to approve his report and adjudge the respective rights and interests of the parties to this proceeding in the trust property. The beneficiaries, James Stanley Nichols and Gladys Long Banta, filed their joint answer. Margaret Lovegreen filed separate answer. Neither answer has been assailed. The cause was tried and resulted in a decree which surcharged the accounts of the trustee and adjudged that the costs of administration "be deducted from the body of the estate and not from the income," and in effect charged against the interest of Margaret Lovegreen a part of the amount of the principal of the estate which the trustee had expended in supporting and maintaining Noah Harry Nichols. Of the parties in interest only Margaret Lovegreen has appealed. The trustee in administering the trust expended the sum of $4213.27 in supporting and maintaining Noah Harry Nichols, of which sum $2577.40 was taken from the principal of the trust estate. The trustee also expended the sum of about $1300, the exact amount is left in doubt, in paying taxes and costs of administration. The appellant argues that the expenses of executing a trust created in a will should be charged against income derived from the trust estate and not against the corpus of the estate unless the testator intended such expenses should be charged upon the principal of the trust property. The following authorities support the appellant's contention: In the matter of Albertson,133 N.Y. 43; Caldwell v. Hopkins, 265 F. 972, 975. The appellant further contends that the will "directs that `the one-half of the value of my estate at the time of my death,' i.e., the one-half Page 491 the trustee was not authorized to encroach upon, should be given to appellant, Margaret Middlekoff Lovegreen. It is plainly evident that testatrix did not intend or contemplate there should be any deduction from said one-half." James Stanley Nichols and Gladys Long Banta say that the will discloses that the main purpose of the testatrix in creating the trust was to provide for the care and maintenance of her son and not to preserve the estate for the other beneficiaries named in the will. The controversy is between remaindermen and calls for a construction of the quoted clause of the will. In construing the will we must ascertain the intention of the testatrix and give effect to such intention. The testatrix said in her will that the trustee should use the income of the estate in supporting and maintaining her son; that if the income were insufficient to support her son the trustee was authorized to use for that purpose "one-half the value of my estate at my death. . . ." In the next clause or sentence the will says that upon the death of Noah Harry Nichols the estate of testatrix shall be divided "one-half of the value of my estate at the time of my death to my granddaughter, Margaret Lovegreen, to have and to hold, to her and her heirs forever." In that plain, clear provision the testatrix bequeathed to appellant one-half of the value of the estate which the former owned at the time of her death. Upon the death of testatrix and the probate of her will, appellant became the beneficial owner of one-half of the value of the estate. The other provisions of the will unmistakably show that the testatrix intended that the performance of the trust should not result in diminishing appellant's bequest. The testatrix said that the trustee should use the income of the estate in supporting and maintaining her son; that if the income were insufficient to support her son the trustee was authorized to use for that purpose "one-half the value of my estate at my death," and that James Stanley Nichols and Gladys Long Banta shall have "the other one-half of my estate which may be left at the death of my son . . . or such part of said one-half as has not been expended for the support of my son. . . ." The will allowed the trustee to use the income and the "other one-half," the unexpended portion of which the will gave to James Stanley Nichols and Gladys Long Banta, but the trustee did not have right to expend any part of the "one-half the value" of the estate of testatrix which the will bequeathed to appellant. It follows that the interest of appellant should not be charged with any of the expenses of administration nor diminished by any other expenditure of the trustee. The judgment is reversed and the cause remanded, with direction to render judgment in conformity to this opinion. Reynolds, C., concurs. *Page 492	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/2812752/	UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) SAFARI CLUB INTERNATIONAL, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 14—0670 (RCL) ) SALLY M. R. JEWELL, in her ofﬁcial ) capacity as Secretary of the US. ) Department of the Interior, et (1]., ) ) Defendants. ) _ ) MEMORANDUM OPINION Plaintiffs in this case challenge a decision of the United States Fish and Wildlife Service (“FWS” or “the Service”) to suspend imports of African elephant trophies sport-hunted in Zimbabwe. The suspension resulted from FWS’s preliminary and ﬁnal determinations in 2014 that sport—hunting of African elephants intended for import to the United States would not enhancc the survival ofthe species. Sec 2d Am. Comp]. [Dkt. # 49"] “l l~3. These determinations reversed the agency‘s prior position on the matter, see id. and plaintiffs in this lawsuit claim that the Service violated the Administrative Procedure Act (“APA”) and the Endangered Species Act in making the determinations. Id. ‘ll 5. Plaintiffs have ﬁled a motion to compel supplementation of the administrative record, which they argue is incomplete. Pls.’ Mot. to Compel Supplementation of Admin. R. & Admit Extra—R. Evidence [Dkt. # 64] (“Mot”). Two documents are at issue in this motion. The ﬁrst is an email dated June 7, 2002 authored by Timothy Van Norman, chief of FWS’s Branch of Permits, concerning import permits for trophies of sport-hunted leopards from Zimbabwe. Email from Timoty Van Norman, Chief, FWS Br. of Permits, to Richard McDonal, FWS (June 7, 2002, 3:05 P.M.), EX. A to Mot. [Dkt. # 64-2] (“Van Norman Email”). Plaintiffs request that the Court order this email to be added to the administrative record because, they assert, it is part of the record but not included in it by the agency, or alternatively, it should be treated as extra-record evidence. Mot. at 13—17, 21. The second document at issue is an email dated June 14, 2002 authored by Karl Stromayer of FWS, with the subject “Visit to Zimbabwe and some issues concerning sport hunting and rhino in Zimbabwe.” Email from Karl Stromayer, FWS, to Kenneth Stansell, et 611., F WS (June 14, 2002, 4:24 P.M.), Ex. B to Mot. [Dkt. # 64-3] (“Stromayer Email”). Plaintiffs request that the Stromayer email be admitted as extra—record evidence or added to the administrative record. Mot. at 17—21; Reply in Supp. of Mot. [Dkt. # 68] (“Reply”) at 8 & n.4. Defendants oppose the motion, and the issue is fully briefed. See Opp. to Mot. [Dkt. # 67] (“Opp”); Reply. Because plaintiffs have not satisﬁed their burden to show that these emails should be added to the administrative record or considered as extra-record evidence, the Court will deny the motion. STANDARD OF REVIEW Judicial review of an agency action under the APA is limited to the administrative record that was before the agency at the time it made its decision. See 5 U.S.C. § 706 (2012); James Madison Ltd. ex rel. Hecht v. Ludwig, 82 F.3d 1085, 1095 (DC. Cir. 1996); see also Camp v. Pitts, 411 US. 138, 142 (1973) (per curiam) (“In applying [the abuse of discretion] standard, the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court”). “ [ T]he record must include all documents and materials that the agency directly or indirectly considered” and “neither more A. Plaintiffs have not satisﬁed their burden to admit the email as extra-record evidence. Plaintiffs argue that the Stromayer email should be admitted as extra-record evidence because the agency “‘failed to examine all relevant factors,‘” Mot. at 18, quoting C ape Hatteras, 667 F. Supp. 2d at 116, and because plaintiffs assert procedural challenges to the agency’s decisions. Mot. at 20—21. Defendants contend that carrying capacity “is not directly relevant” to its suspension of imports, but even if it were, there is more recent information in the record on the issue than the statement in the 2002 email about Zimbabwe’s carrying capacity. Opp. at 10, citing Van Norman Decl. W 20, 22, 23. While a court may admit extra-record evidence when an agency fails to examine all relevant factors, IMS, P. C. v. Alvarez, 129 F.3d at 624, no bad faith nor improper behavior is alleged here, and the Court finds the Stromayer email is not necessary for effective judicial review. Theodore Roosevelt Conservation, 616 F.3d at 514; Cape Hatteras, 667 F. Supp. 2d at 116. Plaintiffs want the Stromayer email admitted because it “speciﬁcally identiﬁed the existing carrying capacity of elephants in Zimbabwe.” Mot. at 19 n6. But if the email were admitted, the Court would not use the statement about the country’s carrying capacity to substitute its judgment for the judgment of the agency. Instead, it would remand the matter back to FWS for consideration. “If the non-record information indicates a failure to consider all relevant factors, remand to the agency for consideration of that information may be in order; substitution of the court’s determination for the agency’s, based on the non-record information, is not.” Sw. Ctr. for Biological Diversity v. Babbitt, 131 F. Supp. 2d 1, 8 (D.D.C. 2001), citing Camp v. Pitts, 411 US. 138 (1973). 11 If plaintiffs want the email admitted to show that carrying capacity is a relevant factor that the agency has considered in the past but failed to consider here, plaintiffs may use the two Federal Register notices cited in their motion to make this argument. The 2002 email is therefore not necessary for effective judicial review of the challenged determinations, and the Court denies plaintiffs’ request to admit the Stromayer email as extra-record evidence.3 CONCLUSION For the reasons stated above, plaintiffs’ motion will be denied. A separate order will issue. ROYgE C. LAMBERTH United States District Judge DATE: June 29, 2015 3 Plaintiffs also argue for the ﬁrst time in their reply brief that grounds exists to supplement the administrative record with the Stromayer email. Reply at 8 & n.4. As a general rule, courts do not consider arguments raised for the ﬁrst time in reply. Huang v. Napolitcmo, 721 F. Supp. 2d 46, 51 (D.D.C. 2010), citing Am. Wildlands v. Kempthorne, 530 F.3d 991, 1001 (DC. Cir. 2008). In any event, the Court ﬁnds that the requirements to supplement the record with the email are not met. Plaintiffs contend that defendants’ argument that the information in the Stromayer email is dated and unsupported “suggests that the information was both relevant and considered. Federal Defendants must have actually considered the Stromayer E-mail in order to evaluate its age and source and must have then rejected the data in the course of making its importation ban decisions.” Reply at 8. But it does not follow that just because defendants assert in their opposition that the email contains old and unsupported data, see Opp. at 10, that defendants must have considered the data when making the 2014 determinations. The assertion shows that defendants reviewed the email in responding to the motion. And if the agency did review the email to “evaluate its age and source” and rejected using the data in it, this shows the agency did not “consider” its contents in making the decisions — which defendants have already acknowledged they did not do. See Van Norman Decl. ﬂ 20. Thus, plaintiffs have not provided “reasonable, non-speculative grounds” that the email was considered by the agency but not included in the record. See Sara Lee Corp, 252 F.R.D. at 34 (citation and internal quotation marks omitted). 12 nor less.” Maritel, Inc. v. Collins, 422 F. Supp. 2d 188, 196 (D.D.C. 2006) (citations and internal quotation marks omitted). Supplementing the administrative record in an APA case means adding material to the volume of documents the agency considered, while admitting extra-record evidence means adding material outside of or in addition to the administrative record that was not necessarily considered by the agency. Pac. Shores Szibdiv. Cal. Water Dist. v. US. Army Corps ofEng'rs, 448 F. Supp. 2d 1, 5 (D.D.C. 2006). A. Supplementing the Record Supplementing administrative records in APA cases is the exception, not the rule. Id at 5, citing Motor & Equip. Mfrs. Ass ’n Inc. v. EPA, 627 F.2d 1095, 1105 (DC. Cir. 1979), and Fund for Animals v. Williams, 391 F. Supp. 2d 191, 197 (D.D.C. 2005). The agency enjoys a presumption that it properly designated the administrative record, and the record will not be supplemented absent clear evidence to the contrary. See Maritel, Inc, 422 F. Supp. 2d at 196. “Because administrative records are presumed complete, motions to supplement the record are granted only in limited circumstances.” Nat ’l Mining Ass ’n v. Jackson, 856 F. Supp. 2d 150, 155 (D.D.C. 2012), citing Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d 497, 514 (DC. Cir. 2010); see also Calloway v. Harvey, 590 F. Supp. 2d 29, 37 (D.D.C. 2008) (“There is a standard presumption that the [administrative] agency properly designated the Administrative Record”) (alteration in original) (citation and internal quotation marks omitted). Plaintiffs bear a “heavy burden” in seeking to overcome this presumption in order to supplement the record. WildEarlh Guardians v. Salazar, 670 F. Supp. 2d 1, 6 (D.D.C. 2009). To carry this burden, “plaintiff[s] ‘must identify reasonable, non—speculative grounds for [their] belief that the documents were considered by the agency and not included in the record.’” Sara Lee Corp. v. Am. Bakers Ass’n, 252 F.R.D. 31, 34 (BBC. 2008), quoting Pac. Shores, 448 F. Supp. 2d at 6. “Plaintiff[s] cannot merely assert that other relevant documents were before the [agency] but were not adequately considered.” 1d. They “must do more than imply that the documents at issue were in the [agency’s] possession. Rather, plaintifﬂs] must prove that the documents were before the actual decisionmakers involved in the determination.” Id. (citations omitted). This burden maintains the “harmonious relationship between agency and court.” Pac. Shores, 448 F. Supp. 2d at 5, quoting Deukmejian v. Nuclear Regulatory Comm ’n, 751 F.2d 1287, 1325 (DC. Cir. 1984), aﬂ’d on reh’g sub nom. San Luis Obispo Mothers for Peace v. US. Nuclear Regulatory Comm ’n, 789 F.2d 26 (DC. Cir. 1986) (en banc). “Were courts cavalierly to supplement the record, they would be tempted to second-guess agency decisions in the belief that they were better informed than the administrators empowered by Congress and appointed by the President.” Deukmejian, 751 F.2d at 1325. The principle that judicial review normally ‘6 should be conﬁned to the administrative record exerts its maximum force when the substantive soundness of the agency’s decision is under scrutiny.” Esch v. Yeutter, 876 F.2d 976, 991 (DC. Cir. 1989). B. Admitting Extra-Record Evidence In addition to supplementing administrative records with material that an agency considered but failed to include, courts have in certain circumstances departed from the general rule oflimitingjudicial review to the administrative record and permitted the introduction ofextra- record information. The DC. Circuit has noted eight circumstances in which other courts have allowed this. Esch v. Yeutter, 876 F.2d at 991 (“(1) when agency action is not adequately explained in the record before the court; (2) when the agency failed to consider factors which are relevant to its ﬁnal decision; (3) when an agency considered evidence which it failed to include in the record; (4) when a case is so complex that a court needs more evidence to enable it to understand the issues clearly; (5) in cases where evidence arising after the agency action shows whether the decision was correct or not; (6) in cases where agencies are sued for a failure to take action; (7) in cases arising under the National Environmental Policy Act; and (8) in cases where relief is at issue, especially at the preliminary injunction stage”).1 The DC. Circuit, in a later case. identiﬁed four instances that might allow for the addition of extra—record evidence: (1) when the agency failed to examine all relevant factors; (2) when the agency failed to explain adequately its grounds for decision; (3) when the agency acted in bad faith; or (4) when the agency engaged in improper behavior. See IMS, P. C. v. Alvarez, 129 F.3d 618, 624 (DC. Cir. 1997). And it held in 2010 that “[t]he APA limits judicial review to the administrative record “except when there has been a strong showing of bad faith or improper behavior or when the record is so bare that it prevents effective judicial review.’” Theodore Roosevelt Conservation, 616 F.3d at 514, quoting Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1, 7 (DC. Cir. 1998); see also Cape Hatteras Access Pres. Alliance v. US. Dep ’t ofthe Interior, 667 F. Supp. 2d 111, 115 (D.D.C. 2009) (Lamberth, C.J.) (“[T]he Esch exceptions are generally more appropriately applied in actions contesting the procedural validity of agency decisions, but even if they are not so limited, it is clear that they were to be sparingly applied to only those cases where extra-record evidence was necessary to make judicial review effective”); Oceana, Inc. v. Locke, 674 F. Supp. 2d 39, 44 (D.D.C. 2009) (“Esch’s discussion of eight 1 The DC. Circuit cited a law review article and cases from the Eighth, Ninth, and Tenth Circuits in compiling this list. Esch, 876 F.2d at 991 n.166, citing Stark & Wald, Setting No Records: The Failed Attempts to Limit the Record in Review of Administrative Action, 36 Admin. L. Rev. 333, 345 (1984); Nat ’l Nutritional Foods Ass ’n v. Weinberger, 512 F.2d 688, 701 (2d Cir. 1975); Indep. Meat Packers Ass ’n v. Butz, 526 F .2d 228, 239 (8th Cir. 1975); Friends of the Earth v. Hintz, 800 F.2d 822, 828—29 (9th Cir 1986); Am. Mining Congress v. Thomas, 772 F.2d 617, 626~27 (10th Cir. 1985). exceptions to the general rule regarding consideration of extra-record evidence was dicta”); Earthworks v. US. Dep’t offhe Interior, 279 F.R.D. 180, 185—86 (D.D.C. 2012) (following the analysis in Cape Hatteras and Oceana). ANALYSIS Plaintiffs’ lawsuit raises a number of challenges to FWS’s April 4, 2014 preliminary determination and July 24, 2014 ﬁnal determination that imports of sport-hunted African elephants from Zimbabwe would not enhance the survival ofthe species. Among them, they claim procedural defects with the determinations. Count I asserts that the agency improperly based its decision on a lack of information, and Count 111 asserts that it failed to provide the public with notice and opportunity to comment before issuing the determinations. 2d Am. Comp. 111] 94—99, 107—112. As part of these proceedings, defendants ﬁled a certiﬁed list of the contents of the administrative record for both determinations. [Dkt. ## 35—1. 39ul, 60-1]. The parties conferred about several documents plaintiffs obtained from the agency through FOIA requests that plaintiffs believed should have been included in the administrative record. Mot. at 5~l 3; see also Ex. C to Mot. [Dkt. # 64-4] (April FOIA request); Ex. D to Mot. [Dkt. # 64-5] to Mot. (July FOIA request). The parties were able to narrow the scope of their dispute to two emails that plaintiffs contend should be part of the administrative record before the Court. Mot. at 12. I. The Van Norman Email A. Plaintiffs have not satisﬁed their burden for supplementation of the administrative record. Plaintiffs assert that the administrative record must be supplemented with an email that Timothy Van Norman wrote on June 7, 2002. Mot. at 13—17. Van Norman is chief of the FWS Branch of Permits, which was responsible for making the “enhancement of survival” determinations at issue in this case. Van Norman Decl., Ex. 1 to Opp. [Dkt. # 67-1] (“Van Norman Decl.”) ﬂ 1. The Van Norman email concerned import permits for trophies of leopards from Zimbabwe. Van Norman Email. In the email, Van Norman states that he would be drafting a Federal Register notice about issuing the leopard permits. Id. The notice would also identify the agency’s concerns “about what is happening in Zimbabwe and the increase in poaching,” that it would seek information from the public on those issues, and that it would “state that we do not know at this time whether we would be able to issue permits for leopards or allow elephant imports next year.” 1d. Plaintiffs assert that the email “memorialized information that was part of Mr. Van Norman’s knowledge base and that remained available for his use in making the April and July importation ban decisions.” Mot. at 13. They argue that it supports their position that defendants failed to follow the required process in making the April and July determinations, but instead based it “on lack of information and without providing formal notice and an opportunity for the public to comment.” Mot. at 15. “Van Norman expressed his understanding of the correct process for the FWS to follow to reverse its position on the legality of the importation of sport—hunted animals from Zimbabwe.” Mot. at 11. Defendants provide a declaration from Van Norman stating that the agency did not consider the email “directly or indirectly in the decision-making process.” Van Norman Decl. ‘H 13. Given this, they argue, plaintiffs have not overcome the presumption that the Service properly compiled the administrative record because plaintiffs have not produced reasonable, non-speculative grounds for their belief that the agency considered the email. Opp. at 6, citing Sara Lee Corp, 252 F.R.D. at 34. The Court agrees with defendants. Plaintiffs seek to supplement the record in this case concerning elephant imports with what is now a thirteen-year-old email about leopard imports. See Van Normal Email. The email’s passing reference to elephant imports is not concrete evidence that the agency considered the email in deciding whether to suspend elephant imports in 2014. Plaintiffs argue the agency must have at least indirectly considered it because Van Norman, a key-decision maker in the 2014 elephant determinations, knew about the email and its contents “by virtue of his authorship,” and it “remained available for his use.” Mot. at 13. But plaintiffs have done nothing more than imply that the document was in the agency’s possession; they have not proven that the document was “before the actual decisionmakers involved in the determination.” Sara Lee Corp, 252 F .R.D. at 34. Plaintiffs obtained the email in a response to their July 24, 2014 F OIA request for materials “regarding or supporting the enhancement of survival finding” made in July 2014. Ex. D to Mot. at 1. Plaintiffs pressed the agency to supplement the July administrative record with this email, but the agency responded that it did not consider the email in making the July finding and erroneously produced it in response to plaintiff 5 July FOIA request. Mot. at 12, citing email from Meredith Flax, U.S. Dep’t of Justice, to Anna Seidman, counsel for Pls., March 19, 2015, Ex. J to Mot. [Dkt # 64-11]. The fact that the agency produced the document in response to a FOIA request — whether erroneously or not V does not demonstrate that the agency considered it in making the determinations at issue in this case. The Court ﬁnds it speculative that the email was “before the agency” when it made the 2014 determinations, and thus ﬁnds that plaintiffs have not satisfied their burden to warrant supplementation of the administrative record with the Van Norman email. B. Plaintiffs have not satisfied their burden to admit the email as extra-record evidence. Plaintiffs alternatively request the Van Norman email to be admitted as extra-record evidence because the email demonstrates that defendants “knew of the mandatory decision—making process that would have been appropriate for a similar concern in 2002,” and so the Court can “effectively assess whether the FWS properly complied with APA rulemaking and the agency’s own procedures for reversing its position on elephant importation.” Mot. at 21. Plaintiffs have not met the requirements for admitting the email as extra—record evidence. They do not allege bad faith nor improper behavior by the agency, and the Court ﬁnds that this email is not necessary to make judicial review effective in this case. See Theodore Roosevelt Conservation, 616 F.3d at 514; Cape Hatteras, 667 F. Supp. 2d at 115—16. The email does not establish what procedure the agency was required to follow in deciding to suspend elephant imports. Rather, it reﬂects Van Norman’s statement in 2002 that the agency would publish a Federal Register notice regarding its issuance of leopard import permits, that the agency was “concerned about what is happening in Zimbabwe and the increase in poaching,” that the Federal Register notice would seek “any information people might have,” and that it would also state the agency did not know at that time whether it would allow elephant imports the following year.2 Van Norman Email. Whether the agency was required to provide for notice and comment before deciding to suspend elephant imports is a legal question for the Court to decide. See Mendoza v. Perez, 754 F.3d 1002, 1020 (DC. Cir. 2014) (describing claims of agency’s failure to comply with notice and comment requirements as “purely legal questions” subject to de novo review); Nat ’1 Mining Ass ’n v. Jackson, 768 F. Supp. 2d 34, 46 (D.D.C. 2011) (holding that whether EPA violated the notice 2 The agency ultimately never issued a Federal Register notice. See Van Norman D601. 1] l6. 9 and comment requirement of the APA presented a purely legal question). Thus, Van Norman’s view on the issue — in 2002 or now — does not inform the Court’s analysis. See Earthworks, 279 F.R.D. at 188 (declining to add a document to the administrative record the “[i]nclusion or exclusion of [which] neither advances nor retards the analysis” for the Court). Accordingly, the Court denies plaintiffs’ motion to admit the Van Norman email as extra-record evidence. II. The Stromayer Email Plaintiffs also seek to have a June 14, 2002 email from Karl Stromayer with the subject “Visit to Zimbabwe and some issues concerning sport hunting and rhino in Zimbabwe” admitted as extra-record evidence. Mot. at 17—21. The email went to multiple individuals at FWS, including then-Assistant Director of FWS for International Affairs Kenneth Stansell. Mot. at 10. It states that Stromayer had recently visited Zimbabwe and reported: “Ariel [sic] survey results suggested that there are approximately 88,000 elephants in Zimbabwe;whereas the carrying capacity of the elephant range is thought to be inthe 42,000—45,000 range.” Stromayer Email at l. Plaintiffs argue that the email “demonstrates that Federal Defendants failed to consider factors relevant to its April and July decisions to ban the importation of elephants from Zimbabwe,” namely “the ‘carrying capacity” of elephants in Zimbabwe.” Mot. at 17—18. They assert that the “carrying capacity of Zimbabwe’s elephants has always been a signiﬁcant factor in the FWS’s consideration of the status and conservation of the species,” citing two Federal Register notices in support. Mot. at 18—19, citing 53 Fed. Reg. 11,392, 11,393 (Mar. 18, 1991), and 58 Fed. Reg. 7813, 7814 (Feb. 9, 1993). They argue this email provides “ﬁrst hand data relevant to the population status of Zimbabwe’s elephants.” Mot. at 10. 10	01-03-2023	06-29-2015
https://www.courtlistener.com/api/rest/v3/opinions/2687062/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA VERNON JONES, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1532 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 3, 2014. An appeal from the Circuit Court for Leon County. Dawn Caloca-Johnson, Judge. Vernon Jones, pro se, Appellant. Pamela Jo Bondi, Attorney General, and Brittany Rhodaback, Assistant Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. VAN NORTWICK, CLARK, and SWANSON, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/706256/	68 F.3d 462 NOTICE: Fourth Circuit Local Rule 36(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.UNITED STATES of America, Plaintiff-Appellee,v.Zonnie Wendell LAWRENCE, Defendant-Appellant. No. 95-5144. United States Court of Appeals, Fourth Circuit. Submitted: September, 1995.Decided: October 10, 1995. William E. Martin, Federal Public Defender, Gregory Davis, Assistant Federal Public Defender, Greensboro, NC, for Appellant. Walter C. Holton, Jr., United States Attorney, Robert M. Hamilton, Assistant United States Attorney, Greensboro, NC, for Appellee. Before RUSSELL, MURNAGHAN, and HAMILTON, Circuit Judges. PER CURIAM: 1 Zonnie Wendell Lawrence pled guilty to one count of possession of crack cocaine with intent to distribute, 21 U.S.C.A. Sec. 841 (West 1981 & Supp.1995). Because he was a career offender, USSG Sec. 4B1.1,* Lawrence's sentencing guideline range was 262-327 months. He was sentenced to a term of 160 months following the government's motion for a downward departure for substantial assistance. Lawrence appeals his sentence, contending he should have been sentenced using the lower penalties applicable to offenses involving powder cocaine. He argues that the penalty structure for crack offenses in Sec. 841(b) and guideline section 2D1.1 is ambiguous and requires application of the rule of lenity. We affirm. 2 Lawrence relies on United States v. Davis, 864 F.Supp. 1303 (N.D.Ga.1994). Since his sentencing, this court has addressed the issue he raises here and has found, contrary to the holding in Davis, that Sec. 841 is not ambiguous and that Congress intentionally penalized offenses involving crack cocaine more severely. United States v. Fisher, 58 F.3d 96, 99 (4th Cir.1995). 3 We therefore find no error in Lawrence's sentence. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not aid the decisional process. AFFIRMED * United States Sentencing Commission, Guidelines Manual (Nov.1994)	01-03-2023	04-17-2012
https://www.courtlistener.com/api/rest/v3/opinions/98262/	234 U.S. 725 (1914) SOUTHERN RAILWAY COMPANY v. CROCKETT. No. 826. Supreme Court of United States. Submitted April 16, 1914. Decided June 22, 1914. ERROR TO THE SUPREME COURT OF THE STATE OF TENNESSEE. 726 Mr. L.E. Jeffries and Mr. L.D. Smith for plaintiff in error. Mr. J.A. Fowler, Mr. A.C. Grimm and Mr. H.G. Fowler for defendant in error. 727 MR. JUSTICE PITNEY delivered the opinion of the court. Crockett, the defendant in error, brought this action in the Circuit Court of Knox County, Tennessee, to recover damages for personal injuries sustained by him while in the employ of the Railway Company. The action was based upon the Federal Employers' Liability Act of April 22, 1908, c. 149, 35 Stat. 65, in connection with the Safety Appliance Act of March 2, 1893, c. 196, 27 Stat. 728 531, and the amendments of 1896 and 1903, c. 87, 29 Stat. 85; c. 976, 32 Stat. 943. He recovered a judgment in the trial court, which was affirmed by the Court of Civil Appeals. A petition for a writ of certiorari being presented to the Supreme Court of Tennessee, that court dismissed the petition and affirmed the judgment. The facts, so far as material, are as follows: Defendant was in interstate carrier by railroad, and plaintiff was in its employ as a switchman and was engaged in a movement of interstate commerce at the time he was injured. The date of the occurrence was October 15, 1910. In making up a freight train, a switch-engine, with a freight car attached, was being moved down grade towards where other freight cars were standing upon the track, when the single car became uncoupled from the engine, and, being propelled by gravity towards the standing cars, came into contact with them. Plaintiff, being upon the car which thus became uncoupled, was by the impact thrown against the brake and injured. He insisted that the car became detached from the engine because of the defective condition of the track at that point, in conjunction with the insufficient height of the draw-bar on the engine. There was evidence tending to show that the ground upon which the track rested was wet and marshy, and the cross-ties broken and insufficient, so that the track was uneven and rough, and that, as a result, the engine and the car attached to it were made to alternately rise and fall at the ends where they were coupled together; and tending further to show that the draw-bar upon the engine, which was used in coupling the car to it, was not more than thirty inches high, measured from the track to the center of the draw-bar; that it was too low to engage properly with the couplers of ordinary freight cars, and that because of the resulting inadequacy of the coupling, together with the unevenness of the track, the car in question became detached. There was, however, evidence 729 tending to show that plaintiff knew of the defective condition of the track and of the engine; that he had passed over the same track frequently with the same engine, and that prior to the occurrence in question cars had, as he knew, repeatedly become detached from the engine because of the conditions mentioned. It was either found or assumed by the state courts that defendant's railway was of standard gauge, and that the standard height of draw-bars for freight cars ranged between a maximum of 34 1/2 inches and a minimum of 31 1/2 inches. See Resolution of Interstate Commerce Commission, June 6, 1893 (Ann. Rep. I.C.C., 1893, pp. 74, 263), construed in St. Louis & Iron Mountain Ry. v. Taylor, 210 U.S. 281, 286; see also, Ann. Rep. I.C.C., 1896, p. 94. It should be noted that the alleged cause of action arose October 15, 1910, after the enactment of the amendment of that year to the Safety Appliance Act, but before the taking effect of the Commission's order respecting draw-bars, made pursuant to the new law. This order while dated October 10, 1910, became effective on December 31 following. Defendant requested the trial court to direct a verdict in its favor, upon the ground that plaintiff admittedly knew of the defects and therefore assumed the risk. The court refused the motion, and likewise refused the request of defendant for an instruction to the jury in the following terms: "If the jury should find from the evidence that the draw-bar of the engine was defective by being too low, or the track defective, and that this caused the engine to become detached from the cars, and this caused the plaintiff's injury, still, if you should further find that these defective conditions had existed prior to that time with the knowledge of the plaintiff, and plaintiff knew before he went to work that the defect existed at that time and that by reason thereof the engine had been accustomed to become uncoupled, and he appreciated the danger, then the court charges you that under those facts the plaintiff 730 could not recover, and your verdict should be in favor of the defendant." The contentions of defendant, overruled by each of the state courts and here renewed, are, that by the true interpretation of the Employers' Liability Act the commonlaw rule respecting the assumption of risk was not abolished except in cases where the violation by the carrier of some statute enacted for the safety of employes contributed to the injury of the employe; and that by the Safety Appliance Act and amendments, as properly interpreted, the height or construction of the draw-bars of locomotives was not regulated, so that the fact that the draw-bar in question was only thirty inches high was not a violation of these acts, and hence afforded no ground for a recovery under the Employers' Liability Act. There is a motion to dismiss, based upon the insistence that the record presents no question reviewable in this court under § 237, Jud. Code (act of March 3, 1911, c. 231, 36 Stat. 1087, 1156). The motion must be overruled, upon the authority of St. Louis & Iron Mountain Ry. v. Taylor, 210 U.S. 281, 293; Seaboard Air Line Ry. v. Duvall, 225 U.S. 477, 486; St. Louis, Iron Mountain & Southern Ry. v. McWhirter, 229 U.S. 265; Seaboard Air Line v. Horton, 233 U.S. 492, 499. Upon the merits, we of course sustain the contention that by the Employers' Liability Act the defence of assumption of risk remains as at common law, saving in the cases mentioned in § 4, that is to say: "any case where the violation by such common carrier of any statute enacted for the safety of employees contributed to the injury or death of such employe." Seaboard Air Line v. Horton, 233 U.S. 492, 502. This leaves for determination the question whether the provision of § 5 of the Safety Appliance Act of 1893 respecting the standard height of draw-bars, together with the order of the Interstate Commerce Commission promulgated 731 in pursuance of it, and the 1903 amendment of that act, had the effect of regulating the height of draw-bars upon locomotive engines, as contended by plaintiff, or upon freight cars only, as contended by defendant.[1] 732 In Johnson v. Southern Pacific Co., 196 U.S. 1, a case that arose under the act as it stood before the 1903 amendment, it was held that the provision of § 2 rendering it "unlawful for any such common carrier to haul or permit 733 to be hauled or used on its line any car used in moving interstate traffic not equipped with couplers coupling automatically by impact, and which can be uncoupled without the necessity of men going between the ends of the cars," was broad enough to embrace locomotive engines within the description "any car." This conclusion was based upon the declared purpose of Congress to promote the safety of employes and travelers upon railroads engaged in interstate commerce, and the specific intent to require the installation of such an equipment that the cars would couple with each other automatically by impact and obviate the necessity of men going between them either for coupling or for uncoupling. The court, by Mr. 734 Chief Justice Fuller, pointed out (pp. 20, 21) that by the amendment of March 2, 1903, the provisions and requirements of the act were extended to common carriers by railroad in the Territories and the District of Columbia, and were made to apply "in all cases, whether or not the couplers brought together are of the same kind, make, or type," and that the provisions and requirements relating to train brakes, automatic couplers, grab irons, and the height of draw-bars, were made to apply to "all trains, locomotives, tenders, cars, and similar vehicles used on any railroad engaged in interstate commerce." And it was said that this amendment was affirmative and declaratory of the meaning attributed by the court to the prior law. In Schlemmer v. Buffalo, Rochester &c. Railway, 205 U.S. 1, 10, it was held that a shovel car was within the contemplation of § 2. In Southern Ry. Co. v. United States, 222 U.S. 20, 26, it was held that the 1903 amendment had enlarged the scope of the original act so as to embrace all locomotives, cars, and similar vehicles used on any railway that is a highway of interstate commerce, whether the particular vehicles were at the time employed in interstate commerce or not. In Pennell v. Phila. & Reading Ry., 231 U.S. 675, the question was whether the provision respecting automatic couplers was applicable to the coupling between the locomotive and the tender. This was answered in the negative, the court saying (p. 678): "Engine and tender are a single thing; separable, it may be, but never separated in their ordinary and essential use. The connection between them, that is, between the engine and tender, it was testified, was in the nature of a permanent coupling, and it was also testified that there was practically no opening between the engine and tender and that attached to the engine was a draw-bar which fitted in the 735 yoke of the tender, and the pin was dropped down to connect draw-bar and yoke. The necessary deduction from this is that no dangerous position was assumed by an employe in coupling the engine and tender for the reason that the pin was dropped through the bar from the tank of the tender." In each of these cases, the letter of the act was construed in the light of its spirit and purpose, as indicated by its title no less than by the enacting clauses. The same guiding principle should be adhered to in considering the question now presented. Conceding that it may be doubtful whether the act, in its original form, evidenced an intent on the part of Congress to standardize the height of draw-bars upon vehicles other than freight cars, and therefore assuming for argument's sake that the act was not in this respect applicable to locomotive engines, it seems to us that the amendment of 1903, manifestly enacted for the purpose of broadening the scope of the original act, must upon a fair construction be deemed to extend its provisions and requirements respecting the standard height of draw-bars, so as to make them applicable to locomotives, excepting such as are in terms exempted. There was abundant reason for applying the standard to locomotives. The draw-bar sometimes called the "draw-head" carries at its outer end the device or mechanism for coupling the cars. The height of the draw-bar determines the height of the coupler, and has an intimate relation not only to the safety of the coupling operation but to the security of the coupling when made. See Car-Builders Dict. (1884), tit. "Draw-bar" and "Draw-head," and Figs. 395-643; Voss, Railway Construction (1892), pp. 16, 91, etc. The evidence in this case shows, without contradiction, that the gripping surface of the coupling knuckle on the freight car in question, measured vertically, was between seven and nine inches, and that 736 because of the comparatively low level of the engine's draw-bar the effective grip was reduced to the point of practical inefficiency. Indeed, it is not seriously disputed that there exists as much reason for having the draw-bars of the locomotive adjusted to a standard of height as exists in the case of freight cars. The experience of the Interstate Commerce Commission, in seeing to the enforcement of the act of 1893, tended to emphasize the importance of interchangeable equipment upon the rolling stock of railroads engaged in interstate commerce, so that cars used in such commerce would readily couple with cars not so used, and that locomotives could be readily coupled with cars of either sort. The 16th Annual Report of the Commission, 1902, pp. 60, 61, recommended to Congress, inter alia: "That provisions relating to automatic couplers, grab irons, and the height of draw-bars, be made to apply to all locomotives, tenders, cars, and similar vehicles, both those equipped in interstate commerce and those used in connection therewith (except those trains, cars, and locomotives exempted by the acts of March 2, 1893, and April 1, 1896)." This recommendation appears to have been evoked by the decision of the Circuit Court of Appeals in Johnson v. Southern Pacific Co., 117 Fed. Rep. 462, afterwards reversed by this court in 196 U.S. 1. The Court of Appeals held that there was nothing in the act of 1893 to require a common carrier engaged in interstate commerce to have every car on its railroad equipped with the same kind of coupling, or to require that every car should be equipped with a coupler that would couple automatically with every other coupler with which it might be brought into contact; and also that the act did not forbid the use of an engine not equipped with automatic couplers. Congress not only responded to the recommendation of the Commission, but enlarged the act more broadly by enacting (Amendment of March 2, 1903, set forth in foot-note, 737 supra) that the provisions and requirements of the original act should be held (a) to apply to common carriers by railroad in the Territories and the District of Columbia; (b) to apply in all cases whether or not the couplers brought together are of the same kind, make, or type; (c) that "the provisions and requirements . . . relating to train brakes, automatic couplers, grab irons, and the height of draw-bars shall be held to apply to all trains, locomotives, tenders, cars, and similar vehicles used on any railroad engaged in interstate commerce, and in the Territories and the District of Columbia, and to all other locomotives, tenders, cars, and similar vehicles used in connection therewith," excepting those exempted by the act of March 2, 1893, as amended April 1, 1896, and those used upon street railways. We have to do especially with the latter clause. As was intimated in Southern Railway Co. v. United States, 222 U.S. 20, 25, its collocation of phrases is not altogether artistic. But at least the purpose is plain that where one vehicle is used in connection with another, that portion of the equipment of each that has to do with the safety and security of the attachment between them shall conform to standard. We cannot assent to the argument that the clause means only that the locomotives used upon all railroads engaged in interstate commerce and in the Territories and the District of Columbia are to be equipped with the appliances provided by the original act for locomotives, and so on with the other classes of cars, and that hence the amendatory act has merely the effect of prescribing the standard height of draw-bars with respect to freight cars, because the original act required such a standard only with respect to cars of that type. This would give altogether too narrow a construction to the language employed by Congress, and would lose sight of the spirit and purpose of the legislation. We deem the true intent and meaning to be that the provisions and requirements 738 respecting train brakes, automatic couplers, grab irons, and the height of draw-bars shall be extended to all railroad vehicles used upon any railroad engaged in interstate commerce, and to all other vehicles used in connection with them, so far as the respective safety devices and standards are capable of being installed upon the respective vehicles. It follows that by the act of 1903 the standard height of draw-bars was made applicable to locomotive engines as well as to freight cars. And so it was held by the Circuit Court of Appeals for the Ninth Circuit in Chicago &c. Railway Co. v. United States, 196 Fed. Rep. 882, 884. Judgment affirmed. NOTES [1] SAFETY APPLIANCE ACT of March 2, 1893, c. 196, 27 Stat. 531. "An Act to promote the safety of employes and travelers upon railroads by compelling common carriers engaged in interstate commerce to equip their cars with automatic couplers and continuous brakes and their locomotives with driving-wheel brakes, and for other purposes. Be it enacted, etc., That from and after the first day of January, eighteen hundred and ninety-eight, it shall be unlawful for any common carrier engaged in interstate commerce by railroad to use on its line any locomotive engine in moving interstate traffic not equipped with a power driving-wheel brake and appliances for operating the train brake system, or to run any train in such traffic after said date that has not a sufficient number of cars in it so equipped with power or train brakes that the engineer on the locomotive drawing such train can control its speed without requiring brakemen to use the common hand brake for that purpose. SEC. 2. That on and after the first day of January, eighteen hundred and ninety-eight, it shall be unlawful for any such common carrier to haul or permit to be hauled or used on its line any car used in moving interstate traffic not equipped with couplers coupling automatically by impact, and which can be uncoupled without the necessity of men going between the ends of the cars. * * * * * * * SEC. 5. That within ninety days from the passage of this act the American Railway Association is authorized hereby to designate to the Interstate Commerce Commission the standard height of draw-bars for freight cars, measured perpendicular from the level of the tops of the rails to the centers of the drawbars, for each of the several gauges of railroads in use in the United States, and shall fix a maximum variation from such standard height to be allowed between the drawbars of empty and loaded cars. Upon their determination being certified to the Interstate Commerce Commission, said Commission shall at once give notice of the standard fixed upon to all common carriers, owners, or lessees engaged in interstate commerce in the United States by such means as the Commission may deem proper. But should said association fail to determine a standard as above provided, it shall be the duty of the Interstate Commerce Commission to do so, before July first, eighteen hundred and ninety four, and immediately to give notice thereof as aforesaid. After July first, eighteen hundred and ninety-five, no cars, either loaded or unloaded, shall be used in interstate traffic which do not comply with the standard above provided for. SEC. 6. That any such common carrier using any locomotive engine, running any train, or hauling or permitting to be hauled or used on its line any car in violation of any of the provisions of this act, shall be liable to a penalty of one hundred dollars for each and every such violation . . . Provided, that nothing in this act contained shall apply to trains composed of four-wheel cars or to locomotives used in hauling such trains. * * * * * * * * SEC. 8. That any employe of any such common carrier who may be injured by any locomotive, car, or train in use contrary to the provision of this act shall not be deemed thereby to have assumed the risk thereby occasioned, although continuing in the employment of such carrier after the unlawful use of such locomotive, car, or train had been brought to his knowledge." AMENDMENT OF APRIL 1, 1896, c. 87, 29 Stat. 85. "Be it enacted, etc., That section six of an Act entitled .. . be amended so as to read as follows: `SEC. 6. That any such common carrier using any locomotive engine, running any train, or hauling or permitting to be hauled or used on its line any car in violation of any of the provisions of this Act, shall be liable to a penalty of one hundred dollars for each and every such violation . . . Provided, that nothing in this Act contained shall apply to trains composed of four-wheel cars or to trains composed of eight-wheel standard logging cars where the height of such car from top of rail to center of coupling does not exceed twenty-five inches, or to locomotives used in hauling such trains when such cars or locomotives are exclusively used for the transportation of logs.'" AMENDMENT OF MARCH 2, 1903, c. 976, 32 Stat. 943. "Be it enacted, etc., That the provisions and requirements of the Act entitled `An Act to promote the safety of employes and travelers upon railroads by compelling common carriers engaged in interstate commerce to equip their cars with automatic couplers and continuous brakes and their locomotives with driving-wheel brakes, and for other purposes,' approved March second, eighteen hundred and ninety-three, and amended April first, eighteen hundred and ninety-six, shall be held to apply to common carriers by railroads in the Territories and the District of Columbia and shall apply in all cases, whether or not the couplers brought together are of the same kind, make, or type; and the provisions and requirements hereof and of said Acts relating to train brakes, automatic couplers, grab irons, and the height of drawbars shall be held to apply to all trains, locomotives, tenders, cars, and similar vehicles used on any railroad engaged in interstate commerce, and in the Territories and the District of Columbia, and to all other locomotives, tenders, cars, and similar vehicles used in connection therewith, excepting those trains, cars, and locomotives exempted by the provisions of section six of said act of March second, eighteen hundred and ninety-three, as amended by the act of April first, eighteen hundred and ninety-six, or which are used upon street railways." * * * * * * * * AMENDMENT OF APRIL 14, 1910, c. 160, 36 Stat. 298. * * * * * * * * "SEC. 3. . . . Said Commission is hereby given authority, after hearing, to modify or change, and to prescribe the standard height of draw bars and to fix the time within which such modification or change shall become effective and obligatory, and prior to the time so fixed it shall be unlawful to use any car or vehicle in interstate or foreign traffic which does not comply with the standard now fixed or the standard so prescribed, and after the time so fixed it shall be unlawful to use any car or vehicle in interstate or foreign traffic which does not comply with the standard so prescribed by the commission."	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/96416/	200 U.S. 496 (1906) MISSOURI v. ILLINOIS AND THE SANITARY DISTRICT OF CHICAGO. No. 4, Original. Supreme Court of United States. Argued January 2, 3, 4, 1906. Decided February 19, 1906. 497 Mr. Herbert S. Hadley, Attorney General of the State of Missouri, Mr. Sam B. Jeffries and Mr. Charles W. Bates, with whom Mr. W.F. Woerner was on the brief, for the complainant. Mr. James Todd for the Sanitary District of Chicago. Mr. Howland J. Hamlin, with whom Mr. John G. Drennan and Mr. W.H. Stead were on the brief, for the State of Illinois. 517 MR. JUSTICE HOLMES delivered the opinion of the court. This is a suit brought by the State of Missouri to restrain the discharge of the sewage of Chicago through an artificial channel into the Desplaines River, in the State of Illinois. That river empties into the Illinois River, and the latter empties into the Mississippi at a point about forty-three miles above the city of St. Louis. It was alleged in the bill that the result of the threatened discharge would be to send fifteen hundred tons of poisonous filth daily into the Mississippi, to deposit great quantities of the same upon the part of the bed of the last-named river belonging to the plaintiff, and so to poison the water of that river, upon which various of the plaintiff's cities, towns and inhabitants depended, as to make it unfit for drinking, agricultural, or manufacturing, purposes. It was alleged that the defendant Sanitary District was acting in pursuance of a statute of the State of Illinois and as an agency of that State. The case is stated at length in 180 U.S. 208, where a demurrer to the bill was overruled. A supplemental bill alleges that since the filing of the original bill the drainage canal has been opened and put into operation and has produced and is producing all the evils which were apprehended when the injunction first was asked. The answers deny the plaintiff's case, allege that the new plan sends the water of the Illinois River into the Mississippi much purer than it was before, that many towns and cities of the plaintiff along the Missouri and Mississippi discharge their sewage into those rivers, and that if there is any trouble the plaintiff must look nearer home for the cause. The decision upon the demurrer discussed mainly the jurisdiction of the court, and, as leave to answer was given when the demurrer was overruled, naturally there was no very precise consideration of the principles of law to be applied if the plaintiff should prove its case. That was left to the future 518 with the general intimation that the nuisance must be made out upon determinate and satisfactory evidence, that it must not be doubtful and that the danger must be shown to be real and immediate. The nuisance set forth in the bill was one which would be of international importance a visible change of a great river from a pure stream into a polluted and poisoned ditch. The only question presented was whether as between the States of the Union this court was competent to deal with a situation which, if it arose between independent sovereignties, might lead to war. Whatever differences of opinion there might be upon matters of detail, the jurisdiction and authority of this court to deal with such a case as that is not open to doubt. But the evidence now is in, the actual facts have required for their establishment the most ingenious experiments, and for their interpretation the most subtle speculations, of modern science, and therefore it becomes necessary at the present stage to consider somewhat more nicely than heretofore how the evidence is to be approached. The first question to be answered was put in the well known case of the Wheeling bridge. Pennsylvania v. Wheeling & Belmont Bridge Co., 13 How. 518. In that case, also, there was a bill brought by a State to restrain a public nuisance, the erection of a bridge alleged to obstruct navigation, and a supplemental bill to abate it after it was erected. The question was put most explicitly by the dissenting judges but it was accepted by all as fundamental. The Chief Justice observed that if the bridge was a nuisance it was an offence against the sovereignty whose laws had been violated, and he asked what sovereignty that was. 13 How. 581; Daniel, J., 13 How. 599. See also Kansas v. Colorado, 185 U.S. 125. It could not be Virginia, because that State had purported to authorize it by statute. The Chief Justice found no prohibition by the United States. 13 How. 580. No third source of law was suggested by any one. The majority accepted the Chief Justice's postulate, and found an answer in what Congress had done. It hardly was disputed that Congress could deal with the 519 matter under its power to regulate commerce. The majority observed that although Congress had not declared in terms that a State should not obstruct the navigation of the Ohio, by bridges, yet it had regulated navigation upon that river in various ways and had sanctioned the compact between Virginia and Kentucky when Kentucky was let into the Union. By that compact the use and navigation of the Ohio, so far as the territory of either State lay thereon, was to be free and common to the citizens of the United States. The compact, by the sanction of Congress, had become a law of the Union. A state law which violated it was unconstitutional. Obstructing the navigation of the river was said to violate it, and it was added that more was not necessary to give a civil remedy for an injury done by the obstruction. 13 How. 565, 566. At a later stage of the case, after Congress had authorized the bridge, it was stated again in so many words that the ground of the former decision was that "the act of the Legislature of Virginia afforded no authority or justification. It was in conflict with the acts of Congress, which were the paramount law." 18 How. 421, 430. In the case at bar, whether Congress could act or not, there is no suggestion that it has forbidden the action of Illinois. The only ground on which that State's conduct can be called in question is one which must be implied from the words of the Constitution. The Constitution extends the judicial power of the United States to controversies between two or more States and between a State and citizens of another State, and gives this court original jurisdiction in cases in which a State shall be a party. Therefore, if one State raises a controversy with another, this court must determine whether there is any principle of law and, if any, what, on which the plaintiff can recover. But the fact that this court must decide does not mean, of course, that it takes the place of a legislature. Some principles it must have power to declare. For instance, when a dispute arises about boundaries, this court must determine the line, and in doing so must be governed by rules explicitly 520 or implicitly recognized. Rhode Island v. Massachusetts, 12 Pet. 657, 737. It must follow and apply those rules, even if legislation of one or both of the States seems to stand in the way. But the words of the Constitution would be a narrow ground upon which to construct and apply to the relations between States the same system of municipal law in all its details which would be applied between individuals. If we suppose a case which did not fall within the power of Congress to regulate, the result of a declaration of rights by this court would be the establishment of a rule which would be irrevocable by any power except that of this court to reverse its own decision, an amendment of the Constitution, or possibly an agreement between the States sanctioned by the legislature of the United States. The difficulties in the way of establishing such a system of law might not be insuperable, but they would be great and new. Take the question of prescription in a case like the present. The reasons on which prescription for a public nuisance is denied or may be granted to an individual as against the sovereign power to which he is subject have no application to an independent state. See 1 Oppenheim, International Law, 293, §§ 242, 243. It would be contradicting a fundamental principle of human nature to allow no effect to the lapse of time, however long, Davis v. Mills, 194 U.S. 451, 457, yet the fixing of a definite time usually belongs to the legislature rather than the courts. The courts did fix a time in the rule against perpetuities, but the usual course, as in the instances of statutes of limitation, the duration of patents, the age of majority, etc., is to depend upon the lawmaking power. It is decided that a case such as is made by the bill may be a ground for relief. The purpose of the foregoing observations is not to lay a foundation for departing from that decision, but simply to illustrate the great and serious caution with which it is necessary to approach the question whether a case is proved. It may be imagined that a nuisance might be created by a State upon a navigable river like the Danube, which would 521 amount to a casus belli for a State lower down, unless removed. If such a nuisance were created by a State upon the Mississippi the controversy would be resolved by the more peaceful means of a suit in this court. But it does not follow that every matter which would warrant a resort to equity by one citizen against another in the same jurisdiction equally would warrant an interference by this court with the action of a State. It hardly can be that we should be justified in declaring statutes ordaining such action void in every instance where the Circuit Court might intervene in a private suit, upon no other ground than analogy to some selected system of municipal law, and the fact that we have jurisdiction over controversies between States. The nearest analogy would be found in those cases in which an easement has been declared in favor of land in one State over land in another. But there the right is recognized on the assumption of a concurrence between the two States, the one, so to speak, offering the right, the other permitting it to be accepted. Manville Co. v. Worcester, 138 Massachusetts, 89. But when the State itself is concerned and by its legislation expressly repudiates the right set up, an entirely different question is presented. Before this court ought to intervene the case should be of serious magnitude, clearly and fully proved, and the principle to be applied should be one which the court is prepared deliberately to maintain against all considerations on the other side. See Kansas v. Colorado, 185 U.S. 125. As to the principle to be laid down the caution necessary is manifest. It is a question of the first magnitude whether the destiny of the great rivers is to be the sewers of the cities along their banks or to be protected against everything which threatens their purity. To decide the whole matter at one blow by an irrevocable fiat would be at least premature. If we are to judge by what the plaintiff itself permits, the discharge of sewage into the Mississippi by cities and towns is to be expected. We believe that the practice of discharging into the river is 522 general along its banks, except where the levees of Louisiana have led to a different course. The argument for the plaintiff asserts it to be proper within certain limits. These are facts to be considered. Even in cases between individuals some consideration is given to the practical course of events. In the black country of England parties would not be expected to stand upon extreme rights. St. Helen's Smelting Co. v. Tipping, 11 H.L.C. 642. See Boston Ferrule Co. v. Hills, 159 Massachusetts, 147, 150. Where, as here, the plaintiff has sovereign powers and deliberately permits discharges similar to those of which it complains, it not only offers a standard to which the defendant has the right to appeal, but, as some of those discharges are above the intake of St. Louis, it warrants the defendant in demanding the strictest proof that the plaintiff's own conduct does not produce the result, or at least so conduce to it that courts should not be curious to apportion the blame. We have studied the plaintiff's statement of the facts in detail and have perused the evidence, but it is unnecessary for the purposes of decision to do more than give the general result in a very simple way. At the outset we cannot but be struck by the consideration that if this suit had been brought fifty years ago it almost necessarily would have failed. There is no pretence that there is a nuisance of the simple kind that was known to the older common law. There is nothing which can be detected by the unassisted senses no visible increase of filth, no new smell. On the contrary, it is proved that the great volume of pure water from Lake Michigan which is mixed with the sewage at the start has improved the Illinois River in these respects to a noticeable extent. Formerly it was sluggish and ill smelling. Now it is a comparatively clear stream to which edible fish have returned. Its water is drunk by the fishermen, it is said, without evil results. The plaintiff's case depends upon an inference of the unseen. It draws the inference from two propositions. First, that typhoid fever has increased considerably since the change and that other explanations 523 have been disproved, and second, that the bacillus of typhoid can and does survive the journey and reach the intake of St. Louis in the Mississippi. We assume the now prevailing scientific explanation of typhoid fever to be correct. But when we go beyond that assumption everything is involved in doubt. The data upon which an increase in the deaths from typhoid fever in St. Louis is alleged are disputed. The elimination of other causes is denied. The experts differ as to the time and distance within which a stream would purify itself. No case of an epidemic caused by infection at so remote a source is brought forward, and the cases which are produced are controverted. The plaintiff obviously must be cautious upon this point, for if this suit should succeed many others would follow, and it not improbably would find itself a defendant to a bill by one or more of the States lower down upon the Mississippi. The distance which the sewage has to travel (357 miles) is not open to debate, but the time of transit to be inferred from experiments with floats is estimated at varying from eight to eighteen and a half days, with forty-eight hours more from intake to distribution, and when corrected by observations of bacteria is greatly prolonged by the defendants. The experiments of the defendants' experts lead them to the opinion that a typhoid bacillus could not survive the journey, while those on the other side maintain that it might live and keep its power for twenty-five days or more, and arrive at St. Louis. Upon the question at issue, whether the new discharge from Chicago hurts St. Louis, there is a categorical contradiction between the experts on the two sides. The Chicago drainage canal was opened on January 17, 1900. The deaths from typhoid fever in St. Louis, before and after that date, are stated somewhat differently in different places. We give them mainly from the plaintiff's brief: 1890, 140; 1891, 165; 1892, 441; 1893, 215; 1894, 171; 1895, 106; 1896, 106; 1897, 125; 1898, 95; 1899, 131; 1900, 154; 1901, 181; 1902, 216; 1903, 281. It is argued for the defendant that the numbers 524 for the later years have been enlarged by carrying over cases which in earlier years would have been put into a miscellaneous column (intermittent, remittent, typho-malaria, etc., etc.), but we assume that the increase is real. Nevertheless, comparing the last four years with the earlier ones, it is obvious that the ground for a specific inference is very narrow, if we stopped at this point. The plaintiff argues that the increase must be due to Chicago, since there is nothing corresponding to it in the watersheds of the Missouri or Mississippi. On the other hand, the defendant points out that there has been no such enhanced rate of typhoid on the banks of the Illinois as would have been found if the opening of the drainage canal were the true cause. Both sides agree that the detection of the typhoid bacillus in the water is not to be expected. But the plaintiff relies upon proof that such bacilli are discharged into the Chicago sewage in considerable quantities; that the number of bacilli in the water of the Illinois is much increased, including the bacillus coli communis, which is admitted to be an index of contamination, and that the chemical analyses lead to the same inference. To prove that the typhoid bacillus could make the journey an experiment was tried with the bacillus prodigiosus, which seems to have been unknown, or nearly unknown, in these waters. After preliminary trials, in which these bacilli emptied into the Mississippi near the mouth of the Illinois were found near the St. Louis intake and in St. Louis in times varying from three days to a month, one hundred and seven barrels of the same, said to contain one thousand million bacilli to the cubic centimeter, were put into the drainage canal near the starting point on November 6, and on December 4 an example was found at the St. Louis intake tower. Four others were found on the three following days, two at the tower and two at the mouth of the Illinois. As this bacillus is asserted to have about the same length of life in sunlight in living waters as the bacillus typhosus, although it is a little more hardy, the experiment is thought to prove one element of the plaintiff's case, although 525 the very small number found in many samples of water is thought by the other side to indicate that practically no typhoid germs would get through. It seems to be conceded that the purification of the Illinois by the large dilution from Lake Michigan (nine parts or more in ten) would increase the danger, as it now generally is believed that the bacteria of decay, the saprophytes, which flourish in stagnant pools, destroy the pathogenic germs. Of course the addition of so much water to the Illinois also increases its speed. On the other hand, the defendant's evidence shows a reduction in the chemical and bacterial accompaniments of pollution in a given quantity of water, which would be natural in view of the mixture of nine parts to one from Lake Michigan. It affirms that the Illinois is better or no worse at its mouth than it was before, and makes it at least uncertain how much of the present pollution is due to Chicago and how much to sources further down, not complained of in the bill. It contends that if any bacilli should get through they would be scattered and enfeebled and would do no harm. The defendant also sets against the experiment with the bacillus prodigiosus a no less striking experiment with typhoid germs suspended in the Illinois River in permeable sacs. According to this the duration of the life of these germs has been much exaggerated, and in that water would not be more than three or four days. It is suggested, by way of criticism, that the germs may not have been of normal strength, that the conditions were less favorable than if they had floated down in a comparatively unchanging body of water, and that the germs may have escaped, but the experiment raises at least a serious doubt. Further, it hardly is denied that there is no parallelism in detail between the increase and decrease of typhoid fever in Chicago and St. Louis. The defendants' experts maintain that the water of the Missouri is worse than that of the Illinois, while it contributes a much larger proportion to the intake. The evidence is very strong that it is necessary for St. Louis to take preventive measures, by filtration or otherwise, against the dangers of the *526 plaintiff's own creation or from other sources than Illinois. What will protect against one will protect against another. The presence of causes of infection from the plaintiff's action makes the case weaker in principle as well as harder to prove than one in which all came from a single source. Some stress was laid on the proposition that Chicago is not on the natural watershed of the Mississippi, because of a rise of a few feet between the Desplaines and the Chicago Rivers. We perceive no reason for a distinction on this ground. The natural features relied upon are of the smallest. And if under any circumstances they could affect the case, it is enough to say that Illinois brought Chicago into the Mississippi watershed in pursuance not only of its own statutes, but also of the acts of Congress of March 30, 1822, c. 14, 3 Stat. 659, and March 2, 1827, c. 51, 4 Stat. 234, the validity of which is not disputed. Wisconsin v. Duluth, 96 U.S. 379. Of course these acts do not grant the right to discharge sewage, but the case stands no differently in point of law from a suit because of the discharge from Peoria into the Illinois, or from any other or all the other cities on the banks of that stream. We might go more into detail, but we believe that we have said enough to explain our point of view and our opinion of the evidence as it stands. What the future may develop of course we cannot tell. But our conclusion upon the present evidence is that the case proved falls so far below the allegations of the bill that it is not brought within the principles heretofore established in the cause. Bill dismissed without prejudice.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/2687065/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA JUAN E. GONZALES, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1557 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 3, 2014. An appeal from the Circuit Court for Gadsden County. Jonathan E. Sjostrom, Judge. Juan E. Gonzales, pro se, Appellant. Pamela Jo Bondi, Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. PADOVANO, WETHERELL, and MAKAR, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/4555591/	Nebraska Supreme Court Online Library www.nebraska.gov/apps-courts-epub/ 08/14/2020 08:07 AM CDT - 849 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports STATE EX REL. COUNSEL FOR DIS. v. SCHILD Cite as 306 Neb. 849 State of Nebraska ex rel. Counsel for Discipline of the Nebraska Supreme Court, relator, v. Christine M. Schild, respondent. ___ N.W.2d ___ Filed August 14, 2020. No. S-20-368. Original action. Judgment of suspension. Heavican, C.J., Miller‑Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ. Per Curiam. INTRODUCTION The State Bar of Arizona entered a “Final Judgment and Order” regarding the respondent, Christine M. Schild, on April 17, 2020. The Counsel for Discipline of the Nebraska Supreme Court, the relator, filed a motion for reciprocal discipline against the respondent. We grant the motion for reciprocal dis- cipline and impose a suspension of 6 months and 1 day. FACTS The respondent was admitted to the practice of law in the State of Nebraska in 1983, in Minnesota in 1985, in Florida in 1990, and in Arizona in 1994. From 1994 to 2014, the respond ent only actively engaged in the practice of law in Arizona. In 1994, she retired due to a disability and changed her status to inactive in these jurisdictions. On April 17, 2020, the State Bar of Arizona issued an order entered on the consent of the parties that found that the respondent violated the Arizona Rules of Professional Conduct. - 850 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports STATE EX REL. COUNSEL FOR DIS. v. SCHILD Cite as 306 Neb. 849 The order suspended the respondent from the practice of law for 6 months and 1 day, effective April 17. The respondent conditionally admitted that she violated the “Arizona Supreme Court Rules of Professional Conduct (Rule 42),” specifically “ER 3.3” (candor toward the tribunal), “ER 5.5” (unauthorized practice of law), “ER 8.1” (bar admissions and disciplinary matters), and “ER 8.4(c) . . . and (e)” (misconduct), as well as “Rules of the Arizona Supreme Court (Rule 41),” includ- ing subsection (c) (maintaining the respect due to courts of justice and judicial officers) and subsection (g) (unprofessional conduct). The charges arose from the respondent’s unautho rized practice of law, subsequent lie that she did not represent clients, and other related behavior. On May 14, 2020, the relator filed a motion for reciprocal discipline pursuant to Neb. Ct. R. § 3‑321 of the discipli nary rules. The motion stated that the above‑cited Arizona Supreme Court rules are in sum and substance the equivalent of Neb. Rev. Stat. § 7‑104 (Reissue 2012) and Neb. Ct. R. of Prof. Cond. §§ 3‑503.3 (rev. 2016), 3‑505.5 (rev. 2012), and 3‑508.4 (rev. 2016), as well as the “lawyer’s responsi- bilities” identified in the preamble of the Nebraska Rules of Professional Conduct. This court filed an order to show cause as to why it should not impose reciprocal discipline. On May 26, 2020, the relator filed a response that requested reciprocal discipline of a period of suspension without specification. On May 29, the respond ent filed a response in which she requested that this court impose identical discipline to that imposed in Arizona. ANALYSIS The basic issues in a disciplinary proceeding against an attorney are whether discipline should be imposed and, if so, the type of discipline appropriate under the circumstances. State ex rel. Counsel for Dis. v. Murphy, 283 Neb. 982, 814 N.W.2d 107 (2012). In a reciprocal discipline proceed- ing, a judicial determination of attorney misconduct in one jurisdiction is generally conclusive proof of guilt and is not - 851 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports STATE EX REL. COUNSEL FOR DIS. v. SCHILD Cite as 306 Neb. 849 subject to relitigation in the second jurisdiction. Id. Neb. Ct. R. § 3‑304 of the disciplinary rules provides that the following may be considered as discipline for attorney misconduct: (A) Misconduct shall be grounds for: (1) Disbarment by the Court; or (2) Suspension by the Court; or (3) Probation by the Court in lieu of or subsequent to suspension, on such terms as the Court may designate; or (4) Censure and reprimand by the Court; or (5) Temporary suspension by the Court; or (6) Private reprimand by the Committee on Inquiry or Disciplinary Review Board. (B) The Court may, in its discretion, impose one or more of the disciplinary sanctions set forth above. Section 3‑321 of the disciplinary rules provides in part: (A) Upon being disciplined in another jurisdiction, a member shall promptly inform the Counsel for Discipline of the discipline imposed. Upon receipt by the Court of appropriate notice that a member has been disciplined in another jurisdiction, the Court may enter an order impos- ing the identical discipline, or greater or lesser discipline as the Court deems appropriate, or, in its discretion, sus- pend the member pending the imposition of final disci- pline in such other jurisdiction. In imposing attorney discipline, we evaluate each case in light of its particular facts and circumstances. State ex rel. Counsel for Dis. v. Murphy, supra. Upon due consideration of the record, and the facts as determined by the State Bar of Arizona, we determine that suspension is appropriate. Therefore, we grant the motion for reciprocal discipline and impose a suspension of 6 months and 1 day. CONCLUSION The motion for reciprocal discipline is granted. The respond ent is suspended from the practice of law for 6 months and 1 day. The respondent shall comply with all notification - 852 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports STATE EX REL. COUNSEL FOR DIS. v. SCHILD Cite as 306 Neb. 849 requirements by suspended members provided by Neb. Ct. R. § 3‑316 (rev. 2014), and upon failure to do so, shall be subject to punishment for contempt of this court. The respondent is directed to pay costs and expenses in accordance with Neb. Rev. Stat. §§ 7‑114 and 7‑115 (Reissue 2012) and Neb. Ct. R. §§ 3‑310(P) (rev. 2019) and 3‑323(B) of the disciplinary rules within 60 days after an order imposing costs and expenses, if any, is entered by the court. Judgment of suspension.	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/1431943/	545 F. Supp. 1314 (1982) The FUND OF FUNDS, LIMITED, F.O.F. Proprietary Funds, Ltd., and IOS Growth Fund, Limited, a/k/a Transglobal Growth Fund, Limited, Plaintiffs, v. ARTHUR ANDERSEN & CO., Arthur Andersen & Co. (Switzerland), and Arthur Andersen & Co., S.A., Defendants. No. 75 Civ. 540 (CES). United States District Court, S. D. New York. July 16, 1982. 1315 1316 1317 1318 1319 1320 1321 1322 1323 1324 1325 Cadwalader, Wickersham & Taft, George D. Reycraft, Richard J. Wiener, Haven C. Roosevelt, New York City, for plaintiffs. Breed, Abbott & Morgan, Edward J. Ross, James D. Zirin, New York City, Wilson & McIlvaine, Charles W. Boand, Chicago, Ill., for defendants. CONTENTS Statement of Facts ....................... 1326 1343 Contentions of the Parties ............... 1343 1345 Subject Matter Jurisdiction .............. 1345 1351 Primary Liability ........................ 1351 1354 Aiding and Abetting Liability ............ 1354 1359 Common Law Fraud ......................... 1359 1362 Breach of Contract ....................... 1362 1365 Jury Instructions ........................ 1365 1372 Evidentiary Rulings ...................... 1372 1374 Damages .................................. 1374 1378 Judgment ................................. 1378 1382 Conclusion ............................... 1382 MEMORANDUM DECISION STEWART, District Judge: Plaintiffs brought suit for defendants' alleged violations of the federal securities laws, common law fraud and breach of contract. All of these claims arise out of plaintiffs' investments in natural resource interests (the "overcharge" claims more fully described at pp. 1328-1335 infra) and the sale of a portion of a particular investment in the Canadian Arctic used to calculate unrealized appreciation on the remainder of plaintiffs' interest (the "revaluation" claim, see pp. 1335-1343 infra). The defendants as plaintiffs' accountants and auditors were charged with primary violations of section 17(a) of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. § 77q(a) (1976), and section 10(b) of the Securities Exchange Act of 1934 ("1934 Act"), 15 U.S.C. § 78j(b) (1976), and aiding and abetting violations of those provisions. Subject matter jurisdiction is based upon section 22 of the 1933 Act, 15 U.S.C. § 77v (1976), section 27 of the 1934 Act, 15 U.S.C. § 78aa (1976), diversity of citizenship and pendent jurisdiction. The case was tried to a jury beginning July 13, 1981. After some 55 trial days and over two weeks of jury deliberation, defendants were held liable for: aiding and abetting violations of section 10(b) of the 1934 Act, and sections 17(a)(1), 17(a)(2), and 17(a)(3) of the 1933 Act regarding the "overcharge" claims; primary violations of section 10(b) and section 17(a)(3) regarding the "revaluation" claims; aiding and abetting violations of section 10(b) and sections 17(a)(1), 17(a)(2), and 17(a)(3) regarding the revaluation claims; and common law fraud and breach of contract regarding both the overcharge and revaluation claims. The jury found that AA was not liable for primary violations of sections 10(b), 17(a)(1), and 17(a)(3) regarding the overcharge claims and that AA was not liable for a primary violation of section 17(a)(1) concerning the revaluation claim.[1] The jury assessed damages for each recoverable overcharge claim at $47,966,079 and for each recoverable revaluation claim at $32,751,763. Following submission of proposed forms of judgment and memoranda, we issued a Memorandum Decision reducing the verdict by the allocable amounts of several prior settlements and awarding prejudgment interest. The Memorandum Decision and judgment entered thereon were sealed because the amount one of prior settlement 1326 included in the calculations was previously sealed. Defendants timely moved for a new trial and for judgment notwithstanding the verdict. The standards for deciding these motions are exacting, but not identical. Hubbard v. Faros Fisheries, Inc., 626 F.2d 196, 199-200 (1st Cir. 1980); Lang v. Birch Shipping Co., 523 F. Supp. 1112, 1114 (S.D.N.Y.1981). On a motion for judgment n. o. v., we are commanded not to weigh the evidence or determine the credibility of the witnesses. Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970). We decide whether the evidence could only lead reasonable persons to a conclusion contrary to the verdict. Sirota v. Solitron, 673 F.2d 566, 572-573 (2d Cir. 1982); Hubbard v. Faros Fisheries, Inc., 626 F.2d at 199; Simblest v. Maynard, 427 F.2d at 4. All reasonable inferences must be made in favor of the party receiving the verdict. Id. Thus, we must affirm the verdict if we find sufficient evidence to support the jury's reasonable findings of fact although a different conclusion is also plausible. See Hubbard v. Faros Fishing, Inc., 626 F.2d at 200; O'Connor v. Pennsylvania R.R., 308 F.2d 911, 914-15 (2d Cir. 1962). See also Planters Mfg. Co. v. Protection Mutual Ins. Co., 380 F.2d 869, 874 (5th Cir. 1967), cert. denied, 389 U.S. 930, 88 S. Ct. 293, 19 L. Ed. 2d 282 (1968). We may grant a new trial in the interests of justice where judgment n. o. v. would not be appropriate. Id. at 881, cert. denied, 389 U.S. 930, 88 S. Ct. 293, 19 L. Ed. 2d 282; Isley v. Motown Record Corp., 69 F.R.D. 12, 16 (S.D. N.Y.1975). We may weigh the evidence on a motion for a new trial "and [we] need not view it in the light most favorable to the verdict winner". Bevevino v. Saydjari, 574 F.2d 676, 684 (2d Cir. 1978). Our object in deciding a motion for a new trial is to prevent a miscarriage of justice or an erroneous verdict. Id. We begin, however, with a statement of facts which a jury reasonably could find in support of the verdict. Statement of Facts 1. Parties Investors Overseas Services, Limited ("IOS, Ltd."), one of the high-flying financial investment vehicles of the 1960's, sponsored and managed mutual funds, among other diversified financial services. IOS, Ltd. was a Canadian company headquartered in Switzerland. Plaintiffs Fund of Funds, Ltd. ("FOF") and IOS Growth Fund, Ltd. ("IOS Growth") were open-ended "offshore" mutual funds controlled and managed by IOS, Ltd. FOF was also a Canadian company, although operations of FOF were directed from Switzerland and corporate records were maintained in Ferney-Voltaire, France. IOS Growth was a clone of FOF, spun-off in December 1969 in response to a change in German law to permit German investors to continue to invest in IOS's mutual funds. IOS Growth received an interest in FOF's assets proportionate to the interest of the German shareholders in FOF before the spin-off about 4% of FOF's assets. As FOF and IOS Growth have identical interests, claims and positions with respect to the transactions at issue, we shall include IOS Growth in our references to FOF, except where expressly indicated to the contrary. FOF initially invested in American mutual funds, hence its name. Due to SEC objections, FOF was forced to change its investment strategy in 1967.[1.5] FOF incorporated FOF Proprietary Funds, Ltd. ("FOF Prop") as an umbrella for specialized discretionary investment accounts managed by individual investment advisors. FOF Prop's investments were largely concentrated in American securities. The subaccount advisors were compensated according to both the realized and unrealized (paper) appreciation of their portfolios. 1327 After all the transactions pertinent to this suit,[2] FOF, FOF Prop and IOS Growth were placed in liquidation under Canadian law, and John Orr was appointed permanent liquidator. Defendants are Arthur Andersen & Co. ("AA") and Arthur Andersen & Co. (Switzerland), one of the "Big Eight" accounting firms. AA was employed as the auditor for IOS, Ltd. "and consolidated subsidiaries and affiliated funds". See Px-59. The Zurich office was officially responsible for a separate report as to FOF. The pertinent part of the engagement letter for 1968 is as follows: Our audit work on companies for which we are responsible will consist of examination of the respective balance sheets and statements of net assets and investments as of December 31, 1968, and the related statements of income, surplus and changes in net assets for the year then ending in order to enable us to express an opinion on the financial position of the respective entities and the results of their operations. These examinations will be made in accordance with generally accepted auditing standards and will include all auditing procedures which we consider necessary in the circumstances. These procedures will include, among other things, review and tests of the accounting procedures and internal controls, tests of documentary evidence supporting the transactions recorded in the accounts and direct confirmation of certain assets and liabilities by correspondence with selected customers, creditors, legal counsel, banks, etc. While certain types of defalcations and similar irregularities may be disclosed by this kind of an examination, it is not designed for that purpose and will not involve the audit of a sufficiently large portion of the total transactions to afford assurance that any defalcations and irregularities will be uncovered. Generally, primary reliance for such disclosure is placed on a company's system of internal control and effective supervision of its accounts and procedures. Of course, any irregularities coming to our attention would be reported to you immediately. Px-59 (emphasis added). The engagement letter for 1969 is identical in this respect. Px-165. 2. Investments in Natural Resource Interests In late 1967 and early 1968, FOF decided to establish the Natural Resources Fund Account ("NRFA") as a subaccount of FOF Prop. The object of FOF in investing in natural resource assets was to avoid a potential stock market downturn. At this time, IOS and FOF officers first contacted John M. King ("King"), a Denver oil, gas and mineral investor and developer. In February 1968, a formal investment advisory contract was circulated between Edward M. Cowett ("Cowett"), the Chief Operating Officer of IOS and FOF, and counsel for King Resources Corporation ("KRC"), Timothy Lowry ("Lowry"), designating Regency Products, Ltd. a KRC subsidiary, as investment advisor to FOF Prop. The agreement with Regency was not finalized. No written investment advisory agreement was ever entered into by FOF or FOF Prop.[2.5]1328 The establishment of the NRFA was also discussed at a meeting of the FOF Board of Directors in Acapulco, Mexico on April 5, 1968. The minutes of this meeting form a cornerstone of FOF's securities law claims and are reproduced below: Messrs. John King, Rowland Boucher and James Fredrickson of King Resources Company, Denver, Colorado, were thereupon invited to join the meeting, and to make a presentation to the Directors concerning the advisability of investments by the Company in oil, gas, mineral and other natural resource properties. Mr. King, assisted by Mr. Boucher and Dr. Fredrickson, explained to the Directors the various types of properties that might be suitable for investment. He indicated that such properties were available both within and without the United States, that the return which might be expected from any property increased with the degree of risk involved (so that pure exploration properties would yield the highest return, assuming discovery, and recovery drillings on proven properties would yield the lowest return), and that a proprietary account with an initial allocation of $10 million should be invested in a minimum of 40 properties (so as to spread risk and insure sufficient diversification of projects). He cited the past record of King Resources Company and of Imperial American and Royal (two publicly offered limited partnerships managed by a King Resources affiliate) to demonstrate that wholly independent of tax considerations (write-off of intangibles, as well as depletion allowance) diversified investment in oil, gas, mineral and natural resource properties could be extremely profitable. He indicated that the role of King Resources with respect to the contemplated Natural Resources Proprietary Account would be that of a vendor or properties to the proprietary account, with such properties to be sold on an arms-length basis at prices no less favorable to the proprietary account than the prices charged by King to its 200-odd industrial and other purchasers. A general discussion ensued concerning the contemplated Natural Resources Account, during the course of which: (i) Mr. Cowett indicated that tax counsel had approved a procedure whereby the Company could utilize intangible write-offs and depletion allowances of the Natural Resources Account to eliminate all or a substantial portion of the 30% withholding on dividends paid to the Company by registered investment companies and (ii) an investment in diversified natural resources properties was approved by the Directors on an experimental basis, with the initial $10 million allocation to be increased only upon satisfactory performance having been achieved. .... It was then suggested that, as the number of proprietary accounts grew, it was advisable for each of such accounts to be assigned for liason [sic] purposes to a particular Director of the Company. After a general discussion, this suggestion was adopted, as well as a further suggestion that the Board of Directors of F.O.F. Proprietary Funds Ltd. be expanded so as to include "outside" Directors (particularly those "outside" Directors previously on the Board of the original Proprietary Funds which were registered investment companies), with the expanded Board of Directors of F.O.F. Proprietary Funds Ltd. to serve as a source of advisory boards for each of the Proprietary Fund Accounts. Pending the enlargement of the Board of Directors of F.O.F. Proprietary Funds Ltd., the following Directors of the Company were assigned to perform liason [sic] functions with respect to the following proprietary fund accounts: Edmund G. Brown Carr Fund C. Henry Buhl, III Hedge and York Funds Allan F. Conwill Computer Directions and Douglas Fund 1329 Edward M. Cowett Groo and Real Estate Growth Funds Pierre A. Rinfret Meid and Technology Funds Eric D. Scott Natural Resources Fund Wilson W. Wyatt Alger Fund Mr. Cowett was instructed to advise the portfolio managers of each of the proprietary fund accounts of the above assignment. Px-32, pp. 9-11, 13. FOF authorized formation of the NRFA, initially capitalized at $10 million, and a wholly-owned subsidiary of FOF Prop, Natural Resources Corporation ("NRC"), a Maryland corporation, to invest in oil, gas and mineral properties and interests. NRC had no offices or employees. TR 2981-82, 8861-62. As NRC had no business which would supply funds for its various purchases, funds for investments were supplied from FOF's account at the Bank of New York. TR 2982-83. a. King's Relationship with FOF There was considerable evidence that John King, KRC and other related corporate entities controlled and managed the NRFA in the same manner as other subaccount advisors. See TR 979-80, 1921, 2992, 6356, 6982, 8308-09, 10,061, 10,067; Px-83; Px-121; Px-392. But see TR 1919-20; Dx-A-12. The King group frequently characterized itself as an investment advisor to FOF. Px-56; Px-80; Px-87. However, investments in natural resource interests were fundamentally different from other FOF Prop investments in one important particular: in each and every natural resource transaction, the interest purchased was a portion of an interest previously or contemporaneously owned by a member of the King group. E.g., TR 9834-36. AA auditors characterized this arrangement as unusual. TR 2415, 3453. FOF's investments in natural resource interests were made as follows: (1) the interests would be identified by the King group either in their "inventory" of properties or purchased for resale to FOF;[3] (2) the King group would "ascertain the potential productivity and [make] the determination of the worth of the property" (TR 9868); (3) a representative of KRC telephoned Cowett in Geneva to recommend the interest and to tell FOF the price (TR 9864); (4) Cowett would agree (although he may have had the "power" to turn down an investment, there is no specific evidence that he ever did so and the jury could infer from the evidence that he never did exercise a veto, e.g., TR 9865; but see, TR 9296-97); (5) KRC would send a bill to FOF, with copies to Scott, the liaison director between FOF and the King group, and Arthur Lipper Corporation (to value FOF shares initially at the cost of the assets purchased, TR 9865); (6) FOF also received a prospect summary outlining the nature and scope of the acquisition (e.g., Px-613). The pricing policy followed by the King group was the subject of considerable testimony, most of it interpreting the phrases used in the minutes of FOF's Acapulco meeting at which King represented that "the role of King Resources with respect to the Natural Resources Proprietary Account would be that of a vendor of properties to the proprietary account, with such properties to be sold on an arm's-length basis at prices no less favorable to the proprietary account than the prices charged by King to its 200-odd industrial or other purchasers". Px 32 (emphasis added). Cowett's general understanding of the pricing policy was stated in a memorandum written on April 19, 1968: KRC would offer properties to NRC "from time to time and on a more or less continuous basis", the terms of sale to be "no less favorable than those offered by [KRC] to other non-affiliated purchasers [and] [a]ll transactions will be arms-length in nature". Dx-A-12. Cowett also stated his understanding of the relationship and pricing policy in a letter dated November 11, 1970:[4] 1330 It was my express understanding (and, I believe, the express understanding of each of the FOF Directors) that: a. Without specific approval, no investment was to be made by the Prop Fund in any resource property, unless KR or affiliated companies had a meaningful investment in the same properties. This was generally understood to be a 50/50 relationship. (However, it was recognized that there would be instances where the Prop Fund had less than a 50% interest, as well as instances where KR, by reason of the limitation of its own resources, would hold less than a 50% interest. In no event was the Prop Fund to have more than a 50% interest.) b. KR was to have a 12½% "net operating profits" interest in respect of any property acquired by the Prop Fund. (I must confess my own naivete was such that I did not understand the true significance between a "net operating profits" interest and a "profit sharing management" fee.) c. The prices to be paid by the Prop Fund were to be no higher than what would be paid by knowledgable industry purchasers on a negotiated arms-length basis. (While I understood that KR might vend properties out of its inventory to the Prop Fund at a mark-up, I viewed the standard set forth in the previous sentence as protecting the Prop Fund; and, when I visualized sales from "inventory", I was thinking in terms of properties held by KR for a meaningful period of time prior to vending, during which period the values of the properties had presumably appreciated by virtue of intervening events.) I understood that KR and affiliated companies would, of course, in setting a price to be paid by the Prop Fund for a resource property, add to the direct cost of the property a reasonable amount to cover investigative and administrative costs incurred as a result of the property acquisition program. I also understood that KR or affiliated companies might perform drilling, coring or other services in connection with property exploration and development; I was specifically advised by John King and/or Rowland Boucher that amounts billed for such work would generally be calculated on a cost plus 7% or 8% profit basis. I might add that in the last few months I have been advised by IOS personnel that in several instances properties were acquired by KR or affiliated companies one day and vended (either that same day or almost immediately thereafter) to the Prop Fund at a 10 times or 20 times mark-up. Such a practice was clearly contrary to the understandings motivating IOS/FOF to enter into and to continue the relationship with KR. a. If KR could buy property at $x, this was a clear indication of the value of such property to knowledgable industry purchasers. b. If a tract of acreage was purchased by KR for $1 an acre, with a "turnabout" vending to the Prop Fund at a price of $10 an acre for 50% of the position, such transaction would fly directly in the face of the underlying concept of KR having a meaningful investment in properties along with FOF. (It was never 1331 intended that FOF have a partner in resource properties who would have a "free ride". We never intended to play a "heads you win, tails I lose" game.) Px-538. Cowett's understanding of arm's-length pricing thus relies upon market value, including KRC's cost, with appreciation over KRC's cost plus a reasonable profit dependent upon the passage of time and intervening events. The price was not necessarily dependent upon there actually being sales to KRC's 200-odd customers. Testimony was elicited on cross-examination of Conwill that supports Cowett's understanding of the pricing policy, the importance of proportionate investment by the King group in interests sold to FOF and the specific treatment of interests acquired by KRC and TCC for substantially contemporaneous resale to FOF. TR 10,076-95.[5]1332 Conwill testified that natural resource interests held in inventory might be priced differently than interests bought specifically for resale to FOF. TR 10,080-83. Cornfeld 1333 also testified that, as to interests purchased for FOF, KRC's cost would reflect the market value. TR 6333-34. b. FOF's Purchases Beginning immediately after the Acapulco meeting FOF began to purchase oil, gas and mineral interests from KRC. King reported to the FOF Board of Directors on August 2, 1968 that $3,000,000 of the initial authorization of $10,000,000 was committed, with great success to date. Px-44. In connection with the year end 1968 audit of FOF by AA, the Denver office prepared a "Summary of 1968 Sales to IAMC, Royal and IOS" as of December 31, 1968. Px-95. This document was one of a series of comparisons of prices charged by the King group to FOF, King affiliates and other knowledgeable industry purchasers. E.g., Px-69, Px-143, Px-160; Dx-K-11. The "Summary of 1968 Sales" (Px-95) shows the following with respect to sales to the King affiliates: Current Current Profit As A Current Sales Cost [to KRC] Profit % of Sales Sales to IAMC $ 9,876,271 $8,220,324 $1,655,947 16.8% Sales to Royal 6,566,491 4,085,544 2,480,947 37.8% Sales to IOS 11,325,386 4,307,583 7,017,803 62.0% In the same document, AA also computed the comparative profits for KRC excluding interests sold to Royal and to IOS (really FOF) which carried exceptionally high markups. AA subtracted the Midbar deal from Royal's calculations, which represented almost 50% of gross sales by KRC to Royal in 1968 and returned a 54.6% profit as a percentage of sales, resulting in a net 22.1% profit margin. Five different transactions were omitted in reaching a net profit figure on KRC's sales to FOF. Individually, these transactions showed profits of 98.6%, 98.7%, 56.7%, 58%, and 85.6%. After subtracting these individual sales, however, KRC's profit as a percentage of sales was over 33%. Thus, AA knew in early 1969 that KRC's sales to FOF were made at significantly higher percentage profits than 1968 sales to King affiliates Royal or IAMC. KRC's "Consolidated Sales to Industry", dated September 30, 1969, illustrates that KRC's profits on sales to FOF were 68.2%, as compared with average profits on all sales of nearly 36%. Px-143. The comparison is especially stark when we examine only the seven industry customers which purchased over $1 million of interests from KRC. The next highest profit/sales ratio 1334 earned by KRC on sales to such customers (after FOF at 68.2%) was 24.4%; the lowest profit/sales ratio was 5%. KRC earned much higher profits on sales to FOF than on sales to its other non-affiliated customers. In 1968, KRC sold $11,829,236 worth of interests to FOF, which KRC purchased for $4,855,001; total 1968 sales to other entities by KRC amounted to $34,040,665, and the purchase price of such interests to KRC was $22,673,406.[6] Px-740. In 1969, KRC did $41,259,314 worth of business with FOF, selling interests to FOF which directly cost KRC $13,220,440; sales to other entities of interests purchased by KRC for $48,848,654 totaled $63,379,281. Id. In 1970, KRC sold interests which it had purchased for $5,053,363 to FOF for $14,855,839; sales to other entities amounted to $13,597,575 on interests purchased by KRC for $9,235,812. Id. FOF also purchased natural resource interests from KRC's sister company, The Colorado Corporation ("TCC"). TCC had 1969 gross sales to other entities besides FOF of $39,239,060 of interests which it purchased for $26,048,157. Px-745. In 1969, FOF purchased interests from TCC for $13,228,449 which TCC purchased for $3,670,844. In 1970, TCC grossed considerably more on sales to FOF than to other entities: only $238,686 was received from other entities for interests which were purchased by TCC for $91,186, while interests obtained by TCC for $1,522,270 were sold to FOF for $4,202,038. These calculations were derived from AA's workpapers. Moreover, there is evidence that the King entities built up a "special inventory" of natural resource interests for resale to FOF, Px-519, and that was known to AA. c. AA's Knowledge of the King-FOF Relationship In addition to auditing FOF, AA audited the King group, including KRC, TCC and John M. King personally. AA's Denver office performed the King audits and did substantial work on the NRFA audit for FOF. TR 1971, 3632-33, 5260-62, 8764. The partner in charge and the manager of the KRC audit held the same positions with respect to the NRFA audit. TR 2883-85, 4629. The NRFA audit was performed by using the records of KRC, TR 1702, 8935, and sometimes AA staffers would work on KRC and NRFA audits contemporaneously. TR 1701-02, 1784. Thus, AA's understanding of the ongoing business relationship between FOF and the King group can be determined from documents found in the AA files for KRC or NRFA and from testimony regarding the actual conduct of the audits. The Denver office did have notice of the investment advisory relationship between KRC and FOF, as described in KRC submissions to the SEC. Px-50, Px-80, Px-87. AA also possessed minutes of an IOS Board of Directors meeting describing the NRFA as "essentially a discretionary account managed by King Resources Corporation". Px-392. During the relevant time period, AA itself noted KRC's "carte blanche authority to buy oil and gas properties for [NRC]", Px-121, see also Px-83, and "quasi-fiduciary" duty to FOF, Px-530. AA also had access to information detailing the King group's costs and profits with respect to FOF. TR 4697-98; Px-66, Px-67. Additionally, AA was aware of the lack of a written contract evidencing the terms of the relationship between KRC and FOF. TR 8816-17. The Denver office sought confirmation 1335 of the nature of any KRC-FOF agreement from KRC for a KRC audit, but did not seek any such information from FOF with respect to the NRFA audit. Although AA's Swiss office received a copy of the Acapulco minutes, see Dx-E-8, it is quite significant that AA's Denver office did not see the minutes, TR 1849, 8535-36, as the Denver personnel were responsible for determining adherence to the pricing agreement. d. AA's Knowledge of the Purchases By AA's calculation, "[t]he earliest date when anyone employed by Andersen would have become aware of KRC's 1968 sales to FOF was in early 1969", AA Brief at 297, prior to the March 24, 1969 date on Px-95. March 24, 1969 was three weeks before AA's audit report for KRC for 1968 was filed. Px-585. However, it is reasonable to find that AA knew what FOF paid for the interests purchased in 1968, that AA knew what KRC paid for them, and that AA knew KRC's profits, prior to February 5, 1969, when the FOF audit report as of December 31, 1968 was filed. Philip Carr testified that Denver first did some "information gathering" on the NRFA at the request of the New York office for the FOF Prop audit as of December 31, 1968. TR 2884, 3433. Some FOF-KRC transactions were reviewed for the 1968 year end audit by Carr in the Denver office of AA before January 28, 1969. Px-157. Nicholas Constantakis testified that New York and Denver were responsible for NRFA matters for the year end 1968 audit. TR 2286, 2385. Graydon Hubbard testified that the Denver office was first asked to provide some sales documents relating to the year end 1968 FOF audit and that it obtained such documents from KRC. TR 4624, 4627. There is no evidence that the NRFA was audited by AA as of June 30, 1968 although FOF was audited twice yearly or what such audit showed. AA viewed King and his companies as a difficult client, posing difficult issues and some risks to AA itself, prior to the year end 1968 KRC audit and as early as 1966. TR 2271, 3415, 3424, 4742.[7] AA also viewed FOF as presenting difficult problems. TR 2303-05. However, the year end 1968 audit is the first instance of AA's actual knowledge of King's sales and profits. See Px-69; Px-95. The Denver office of AA had primary responsibility for audits of the NRFA occurring after year end 1968. This involved scrutiny of the "back-up documents" on NRFA. TR 2142. For the FOF audit as of June 30, 1969, AA's Denver office determined the cost value of NRFA purchases by reference to the KRC books. TR 3438-39. AA did not determine the market value of the NRFA interests for the FOF audit as of June 30, 1969, but did review the valuation as being in accordance with FOF's guidelines, which basically referred the matter of valuations to Rowland Boucher of KRC. TR 3447-53. The FOF financial statements for the periods as of June 30, 1968, December 31, 1968, and June 30, 1969 were unqualified. 3. Revaluations As an open-ended mutual fund, FOF was required to value its investment portfolio on a daily basis. The daily share value was determined by dividing the net asset value of FOF's entire portfolio by the number of outstanding shares. Dx-A-1. FOF redeemed shares on the basis of its daily share value a value that was too low would undercompensate redeeming shareholders, and one that was too high would overcompensate them. Natural resource interests posed sensitive problems of valuation, due to their speculative nature and the lack of a market for determining current realizable value. a. Fox-Raff In late 1968, John King arranged with Robert Raff, president of a Seattle brokerage 1336 firm, to sell 10% of a certain natural resource interest owned by FOF to provide a basis for revaluation of FOF's remaining 90% interest. The purchase priced totaled $440,000, with an $88,000 down payment required. However, Raff and his company did not have the money to make the down payment. TR 1311. King advanced Raff the money to make the down payment, TR 1938-39, and assured Raff that no further financial commitment was necessary. TR 1266, 1269-72; Px-499. Without knowing that the Fox-Raff sale was not an "arm's-length" transaction, AA auditors questioned the objective basis for a write-up based upon the short holding period for the interest, the lack of any strikes or new geological information on the area, and doubted whether the 10% sale was sufficient to establish the value of the whole parcel. TR 1916. On the basis of these doubts, AA resolved to "write a letter to the Board of Directors of FOF Prop and FOF pointing out lack of adequate objective basis for unrealized appreciation, lack of disclosure in prospectus, and fact that our passing this unrealized appreciation on the basis of immaterial [sic] doesn't set a precedent for future". Px-77. No such letter was ever sent to the FOF Prop or FOF Boards, or to anyone else.[8] It was also thought by AA to be desirable to have an independent appraisal of the interests. TR 1984. Discussions within the AA ranks concerning Fox-Raff extended to the very highest partnership level. The AA partner working on the year end 1968 FOF Prop audit, John Robinson, was notified in January 1969 by Phil Carr of the Denver office of the fact that the sale to Fox-Raff was not at arm's length because King had advanced the down payment to Raff in the form of a non-interest bearing loan. TR 1928, 1950. Robinson recorded the conversation with Carr as follows: Phil Carr telephoned to say that the $88,000 cash paid to National Resources Corp. at 12/30/68 (20% of contract amount was advanced (non-interest bearing) by King Resources Corp. for a/c of the purchasers because their corporation had not yet been formed. On 1/30/69 (today) allegedly the $88,000 is being paid to King Resources by either the purchaser or the parent of the purchaser (Fox, Raff). The significance of the above appears to be that the original seller (King Resources), who are now in one or more joint ventures with Natural Resources Corp., advanced on 12/30/68 money (at no interest) for account of new purchaser to old purchaser so old purchaser could within his calendar year (1968) pick up unrealized appreciation and thus increase the earnings and N.A. [net asset] value of the stock of an offshore mutual fund by approximately 4 cents to 5 cents per share. PX-79. AA never told any representatives of FOF, FOF Prop or IOS that the sale was not bona fide. However, AA determined to treat the transaction as not material to FOF's financial statement, despite its non-arm's length character.[9] TR 1984. The Fox-Raff transaction resulted in a write-up of unrealized appreciation in certain natural resource interests of $820,000 or about 2-½ cents per share, and was reflected in the year end 1968 financial statement of FOF with a footnote to the effect that such a gain was determined by the Board of Directors of FOF. Dx-A-24. Fox-Raff was also audited by AA. Both Raff and AA workpapers confirm AA's 1337 knowledge that the investment would be sold within six months, so that Raff would never have to meet the remaining financial obligations to FOF. TR 1297-98; Px-65, Px-107.[10] When FOF pressed for payment, Raff sought and obtained the means to pay FOF from Boucher at KRC. TR 1360-61, 1365-67, 1385-87; Px-139. AA/Denver knew of the prepaid commission chosen by Boucher to provide Raff with the means to pay FOF. Px-209; Px-290. b. Development of Guidelines In connection with a proposed mid-1969 revaluation, FOF informed KRC that AA's Denver office would have "full audit responsibility for the investment account both as to cost and market value" and expected AA/Denver to confirm to AA/New York and AA/Geneva "that they have satisfied themselves as to the cost and market valuation of the investments of NRC as of June 30, 1969." Px-112. Although the prospect of opining on the market values of FOF's investments troubled Phil Carr of AA's Denver office, Px-116, he was informed by the Geneva office that it would not be sufficient merely to disclose the method of valuation if that "does not fairly present the facts." Px-119. It was understood that KRC was establishing values for FOF's natural resource interests. TR 3452-53; 4827; Px-158. Carr did meet with KRC to review the mid-1969 revaluations made by KRC at the end of July 1969. The mid-1969 revaluation totalling $18,884,976, was made by Boucher and supported by an appraisal by J. C. Sproule and Associates, independent Canadian geological and engineering consultants. This fixed the per acre value at approximately $2.00. In the fall of 1969, AA was asked by Boucher of KRC what kind of sale or documentation was required to support a revaluation of FOF's Arctic interests. TR 8658-59. After this inquiry, AA sought to establish guidelines or "general ground rules" for revaluations based upon unrealized appreciation to provide "substantive independent evidence for reviewing the reasonableness of the client's valuations." A November 7, 1969 memorandum authored by Phil Carr set out AA's proposal: [A]ny significant increase in the value of natural resource properties over original cost to FOF must, for audit purposes, be supported by either: (1) An appraisal report rendered by a competent, independent expert, or (2) an arms-length [sic] sale of a sufficiently large enough portion of a property to establish a proportionate value for the portion retained. Item (2) above is where we currently are not in clear agreement with the client. King Resources Company (Rowland Boucher) has been informed by FOF (purportedly Ed Cowett, Executive Vice President) that sale of a 10% interest in a property would be sufficient for FOF's purposes in ascribing a proportionate value to the 90% retained. This procedure was first used at December 31, 1968, when King Resources Company arranged, on behalf of FOF, for the sale of a 10% interest in an oil and gas drilling prospect and certain uranium claims and leases to Fox-Roff, [sic] Inc., a Seattle brokerage firm affiliate.... .... Since our responsibilities here in Denver with respect to the December 31, 1968, FOF audit consisted only of determining the basis on which King Resources Company determined the valuations (not auditing such values), we discussed this transaction with John Robinson and Nick Constantakis in New York but left any final audit decision up to them. It is our understanding that the King Resources Company valuations determined by the 10% sale were allowed to stand in the final FOF audit report. .... 1338 On the question of what constitutes adequate sales data for valuation purposes (i.e., the 10% question), we have proposed the following to King Resources Company: (1) No unrealized appreciation would be allowed on sales of relatively small percentages of properties to private investors or others who do not have the necessary expertise to determine a realistic fair market value. By "relatively small", we envision approximately 50% as being a minimum level in this type of sale to establish proportionate values for the remaining interests. This would preclude any unrealized appreciation on sales such as the December, 1968, sales to Fox-Roff, [sic] Inc. since it could not be reasonably sustained that a brokerage firm has the expertise necessary to evaluate primarily undeveloped resource interests. (2) Appreciation would be allowed if supported by arms-length [sic] sales to knowledgeable outside parties. For example, if King Resources Company sold a 25% interest in the Arctic permits to Texaco or another major oil company, we believe it would be appropriate to ascribe proportionate value to the 75% retained. Just where to draw the line on the percentage has not been clearly established. We feel 10% would be a bare minimum and would like to see a higher number. It appears that we will be faced with a valuation problem along the above lines relatively soon since King Resources Company in September, 1969, has apparently made a sale somewhere in the neighborhood of 10-15% of FOF's interest in a South African diamond property. The buyer is purportedly a Canadian mining company of unknown quality, but probably is not the type buyer in this situation that Texaco would be to an oil and gas property. King Resources Company is proposing to use this sale as the basis for a $3.5 million write-up in FOF's remaining interest, which write-up would be included in their September 30, 1969, valuation reported to FOF. Both Dee Hubbard and Cal Bennett have been heavily involved in our work to date and will continue to participate rather closely in our future responsibilities for this client. We would certainly appreciate your thoughts on our valuation approach problems, John, after you have had a chance to review the enclosed material. Px-158. This memorandum was circulated to AA partners March in Chicago (the senior AA partner responsible for audit practices), Evenson in Los Angeles (the regional audit practice director), Robinson in New York, and Tenz in Geneva. A copy was given to Cowett. John March suggested a sale of a "25-30% minimum", a more conservative figure (TR 5512), and stated that it "[m]ust be a cash deal with no take-out option".[11] Px-164. The guideline finally adopted by FOF in the spring of 1970 for inclusion in the 1969 Annual Report was slightly different: Natural resources The following sets forth the present guidelines established by the Boards of Directors of the fund and Proprietary with respect to the valuation of natural resource properties. Such guidelines have been consistently followed. (a) Such properties are carried at cost, until an event of such obvious and compelling significance occurs as to require a change in that value. Discovery of a mineral interest, determination of the property being unproductive through testing or other geological evaluation, or a sale of all or a portion of the property held would be among the factors which would constitute such an event. (b) A partial sale may be used as a basis for evaluation of unrealized appreciation 1339 on the remaining holdings when such sale is at arm's length, and when a sufficient percentage of Proprietary's holding is sold. (c) Outside appraisals are used only in those cases where the Boards of Directors are satisfied that there is appropriate substance to recognition of unrealized appreciation on the basis of appraisal. However, where significant unrealized appreciation is involved, independent appraisals may not be considered sufficient and demonstration of the current realizability of such appreciation through a consummated sale may be required. Dx-B-2. FOF's guideline does not specify a fixed percentage which must be sold and does not refer to the identity or attributes of a buyer. c. Arctic Revaluation With AA's guidelines in mind, KRC tried to find a major oil company to purchase a significant interest in the Canadian Arctic. KRC was unsuccessful in attempting to sell a 25% interest in the Canadian Arctic to Standard Oil of Indiana in late 1969. TR 4564-65. A subsequent proposal was for FOF Prop to sell 25% of their Arctic interest to an independent group of investors for $50 million cash, resulting in unrealized appreciation of the remainder of FOF's interest of $150 million. Px-170. Finally, King arranged a sale of 9.375% of his group's Arctic interest to third parties in late December 1969 and FOF in essence reimbursed King by selling an identical interest in its Arctic holdings to the King group in January 1970 on the same terms as King's original sale. The 1970 FOF Annual Report details the transaction as consummated: In January, 1970, Proprietary concluded a sale for its subsidiaries of 10 per cent of their interests in the Arctic permits. This sale was made to the operator of the permit interests on the same bases and terms as a December, 1969, sale by such operator of a 9.375% interest to outside third parties. Sales proceeds consisted of $779,300 cash down-payment and $7,570,000 payable in six semi-annual installments beginning in 1973 and bearing interest at 6% per annum. The sales agreement also relieves the sellers of 80% of the first $10,436,500 of their commitment for exploration costs. The purchasers have thereby assumed an obligation for exploration costs which is $7,305,500 in excess of such costs applicable to their interests in the permits. Based on the terms of the sale outlined above, and as approved by the Boards of Directors of the Fund and Proprietary, Proprietary has valued its subsidiary's interest in the Arctic permits at $119,000,000. Such value represents a gross valuation of $156,000,000 less, (a) discounting to provide an effective 8½% interest rate on permit payments and an effective 10% interest rate on excess work obligation payments ($20,000,000) and, (b) the 12½% net operating profits interest ($17,000,000). The portion of that valuation applicable to Proprietary is $114,240,000, equal to $10.60 per net acre. After deduction of management fees and income taxes, the Fund's value per net acre is $8.01. Dx-B-2. The cash portion of the sale amounted to approximately 4% of the purchase price. This sale of FOF's 9.375% interest in the Canadian Arctic to John Mecom and Consolidated Oil & Gas ("COG") was the basis for the $119 million upward revaluation of the remainder of FOF's Arctic interest. Although John King (personally) and Lakeshore Associates (a King affiliate) also purchased some of FOF's interest at the same time, they were not considered by AA in evaluating the transaction. Mecom, a wealthy Texan who owned U. S. Oil of Louisiana, Inc. was experiencing severe cash flow problems as of December 1969. Mecom lost $11,458,000 for the year ending September 30, 1969, Px-147, and even after he refinanced several loans that were in default in 1968, TR 4262-63, Px-39, faced debts of over $132,000,000. AA audited Mecom from its Houston office, TR 4146, and knew of his cash bind, TR 4149-51, 4272. In February 1968, Leonard Spacek, AA's managing partner, met with King and Mecom to discuss integration of the King 1340 and Mecom organizations, TR 4265-66, Px-29. Spacek also discussed a role for KRC in refinancing Mecom's debts in May 1968 and in December 1968 Spacek discussed the possibility of a King-Mecom joint venture with the Houston office of AA. TR 4272; Px-36; Px-51; Px-61. In late 1969, King was casting about for a purchaser for a portion of FOF's Arctic interest to justify a revaluation. King approached Mecom with a deal that was remarkably similar to the one offered Raff a year earlier. A King employee asked Mecom to purchase an interest in the Arctic. King would provide the $266,000 down payment, TR 3975, and subsequent $10 million in payments would be provided by King's use of Mecom-owned oil and drilling equipment. TR 3969. The King-Mecom deal was consummated on December 24, 1969 and a written side agreement enabling Mecom to make the Arctic purchase was executed: Dear Mr. Mecom: This is to confirm my agreement with you in connection with your purchase from King Resources Company of approximately 347,883 net acres of oil and gas exploration permits in the Canadian Arctic Islands for $7.50 per acre plus $7.50 per acre in work obligations under the terms of an agreement with King Resources Company dated December 24, 1969. I have agreed to provide sufficient net cash receipts to be paid to you to enable you to make all payments on your said contract with King Resources Company through payments due in October, 1971. At any time after October 1971 up to December 31, 1971, I have also agreed that if you so request and assign to me your interest to said permits, I will assume and pay and hold you harmless from all obligation to pay all amounts due King Resources under said contract subsequent to October, 1971. Provided that if, prior to October 1971, you are afforded an opportunity to sell your interests at a price in excess of your costs, my further obligations hereunder shall cease. This letter will be held for our mutual account by Timothy G. Lowery [sic] of Peterson, Lowry, Rall Barber & Ross of Chicago, Illinois. Px-193. The final side agreement was different from King's original proposal, but it was a necessary prerequisite to Mecom's participation in the transaction. TR 3959-60; 3968. COG was a Denver-based oil and gas concern headed by a friend of King. TR 4328, 4522. COG was not a major oil company. TR 4523, 4585-86, 4826-27, 9045. To AA's knowledge, the King entities and COG had previously joined in business transactions. TR 9101-02; Px-385. King arranged a $600,000 loan for COG with a Tulsa, Oklahoma bank, TR 4405, 4474, without which COG would not have entered into the transaction. TR 4375-76. There is conflicting evidence whether COG had a side agreement with King whereby COG "could turn the acreage back to King Resources today if it wished, cancelling all further payments". Px-412. In February 1970 KRC purchased one-half of COG's interest in certain Alaskan property for $15 per acre. Since KRC had rejected such a transaction four months earlier and COG was apparently willing to accept $3 per acre, Px-146, this deal may also support a conclusion that KRC and COG had a side agreement concerning the December 1969 purchase by COG from FOF. There was considerable discussion within the AA ranks concerning possible qualification of the FOF financials when the magnitude of the proposed revaluation became clear in mid-December 1969. The Denver office did not believe that AA could give an unqualified opinion "on the overall market value of [FOF's] investments at December 31, 1969." Px-172; Px-179. The Denver office, charged with the responsibility of checking the values of FOF's purchases, "tried to emphasize that [their] work [] is not necessarily authority for rendering unqualified opinion when natural resources fund becomes [a] material part of FOF." Px-179. Los Angeles-based regional audit practice director Evenson concurred in Denver's assessment. Id. The Denver office stressed that it was a policy decision to be 1341 made by March, at AA's home office in Chicago, "whether [the] firm can give [an] unqualified opinion on fund when [a] material part of [FOF's] portfolio is invested in assets which are not valued by an active daily market of sellers selling and buyers buying." Id. March's initial reaction was that revaluation of the whole parcel on the basis of a proposed sale of a one-eighth interest for $21,000,000 seemed like "a great deal of maneuvering of values based on very little cash received at the present time." Px-175. Alan Brodd of AA's Geneva office, however, noted that FOF's response to a qualification would be "an explosion" since FOF would follow "the creteria [sic] we have laid down." Px-178. Brodd asked: "What is different now compared to 6.30.69 when amounts were material?" Id. It is quite clear that FOF did not want anything in the auditor's opinion which could be interpreted as a negative statement with respect to the revaluation. TR 3040-42, 5529. In response to Brodd, March said that he did not foresee qualification in the usual sense. Px-181. After consultation with various AA partners, the decision was made by March to add the following sentences to the "scope paragraph" of the auditor's report: "Certain investments, in the absence of quoted market prices, have been valued by the Board of Directors as indicated in note ____. These valuations have been reviewed by us to ascertain that they have been determined on the bases described." Px-190. The "opinion paragraph" would commence as follows: "In our opinion, which as to certain investment valuations is based upon the determination referred to in the preceding paragraph, ...". Id. Although March contended that this was a qualified opinion, he did agree that this might not be considered qualified in some technical sense. TR 5534-37. The IOS Growth opinion was not qualified according to prevailing AA and industry standards. Px-598; Px-666. Although the jury reasonably could find that AA considered the need for an appraisal by an independent geological and engineering consultant as a basis for the Arctic revaluation, TR 3045, 5561; Px-243, no appraisal was made either before or after the transaction was consummated. TR 5562. AA had no knowledge of the Mecom side deal or the February 1970 KRC-COG transaction, prior to its December 23 interoffice statement between Chicago and Geneva confirming the language that would be used in AA's auditors' certificate for the IOS Growth report. However, it is clear that the "general ground rules" reflected in the November 7 memorandum for revaluation based upon unrealized appreciation were not satisfied and that no appraisal was obtained. Assured that AA would give an unqualified opinion even after the 1969 revaluation, Cowett ordered that the transaction be finalized. TR 3049-50; Px-191. The sale by King was made on December 26, 1969 and the revaluation by FOF was performed that night (a Friday). Px-191. Sales and redemptions of FOF shares at the higher price reflecting the revaluation began immediately. d. Blakely-Wolcott In 1966-67, KRC engaged in a circular transaction referred to at trial as Blakely-Wolcott: (1) In 1966, KRC sold property to H. J. Blakely for $855,000 and KRC recognized a profit of $760,000; (2) shortly thereafter, Blakely sold the property to Wolcott (later the President of TCC); (3) some two months later, Wolcott conveyed the property to KRC for 50,000 shares of KRC stock. The profit realized by KRC on the Blakely deal constituted almost 40% of KRC's profits for 1966. See Px-754. Moreover: King had signed a representation letter in 1967 that all transactions of KRC and its officers were arm's length and that KRC's officers and key employees had no material direct or indirect participation in outside business enterprises purchasing from or selling to KRC. TR 9086-87. In the course of AA's audit of KRC as of December 31, 1967, the Blakely-Wolcott transaction was questioned as "a borderline case of simply writing up property." Px-33. At a meeting between AA and KRC to finalize the KRC year end 1967 financial statements, it was agreed by 1342 Messrs. March, Lawrence and Carr of AA not to require any change in KRC's treatment of Blakely-Wolcott. Mr. March took a firm position that had the above transactions all occurred within the same year, a reversal of the profit would be required with the property being recorded at no more than original cost at date sold plus subsequent expenditures. He noted, however, that reversing the profit in 1967 on this transaction would create a charge to income extraneous to actual 1967 operations. Thus, while not specifically approving of the method used to record the transaction, Mr. March concurred with Mr. Lawrence's willingness to live with the Company's accounting as long as we reached satisfactory agreement on the other matters. Id. Within two weeks after the December 1969 Arctic revaluation was accomplished, Hubbard, the Denver partner in charge of the NRFA and KRC audits, discovered conclusive evidence that Blakely-Wolcott was a fraudulent 1966-67 write-up arranged by King. In auditing John King's personal accounts, Hubbard found a side agreement between King and Wolcott, Px-23, essentially relieving Wolcott of any risk by guaranteeing to repurchase the KRC shares obtained by Wolcott, by guaranteeing a bank loan used by Wolcott to obtain the shares, and by agreeing to employ Wolcott in the King group. Px-221; TR 3403-04; 4540-47. On January 2, 1970, Hubbard sent a memorandum to Evenson and March describing the new information and its significance. Px-221. The side agreement called into question the truthfulness of King's 1966 representation letter. e. Issuance of Opinions The IOS Growth audit report was required to be filed on or before January 31, 1970. TR 2260-61; Px-231. Final decisions on the auditors opinion for FOF's year end 1969 report were not made until late May 1970. TR 5674. AA's audit thus continued after the December 1969 Arctic revaluation and after AA knew about Blakely-Wolcott. AA sought and obtained representation letters from King and Boucher that the Arctic sale was bona fide. Px-262. Although AA obtained representation letters from Mecom and COG confirming the terms of the express purchase agreement, Px-247; Px-248, no inquiry was made of Mecom or COG concerning side agreements, as was made to KRC. TR 4009, 4436. Hubbard also obtained a Dun & Bradstreet report on Mecom. Px-277. In May 1970, prior to issuing FOF's report, AA learned of an article in the Wall Street Journal which cast doubt on COG's obligation. AA thereupon obtained a reconfirmation from KRC, Px-422; Px-432, and Carr personally discussed the matter with COG's principal and obtained a reconfirmation specifically excluding side deals, Px-423, but no further inquiry as to side deals was made to Mecom. AA's continuing audit of FOF generated additional information regarding KRC's multifaceted relationship with IOS and FOF; in addition to IOS's substantial investments in and with KRC and related companies, at this time KRC became a significant shareholder of IOS. TR 5690. In late May 1970 AA decided that "subject to" qualification was necessary in issuing its report concerning FOF as of year end 1969.[12] The FOF Directors were so informed in June and July 1970. TR 5700-01. The 1969 auditors' report for FOF reads as follows: To the Shareholders and Board of Directors, The Fund of Funds, Limited: We have examined the consolidated statements of net assets and investments of 1343 The Fund of Funds, Limited (an Ontario, Canada, corporation) and subsidiary as of December 31, 1969, and the related consolidated statements of fund operations and changes in net assets for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Investments owned by the Fund at December 31, 1969, were confirmed directly to us by the custodian or brokers. The position of investments sold short was confirmed directly to us by the custodian or brokers. Consistent with past practice, certain investments, in the absence of quoted market prices, have been valued by the Board of Directors as indicated in Note 9. These valuations have been reviewed by us to ascertain that they have been determined on the bases described, but since we are not competent to appraise these investments we do not express an opinion as to such valuations. In our opinion, subject to the effect of certain investment valuations referred to in the preceding paragraph, the above-mentioned financial statements present fairly the financial position of The Fund of Funds, Limited and subsidiary as of December 31, 1969, and the results of their operations and the changes in their net assets for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Dx-B-2. Contentions of the Parties Having summarized the facts which a jury could reasonably find, it is appropriate and helpful to review the contentions concerning the legal effect of such facts. As the charge stated the parties' contentions, and was reviewed and approved by counsel, it provides the basic arguments of each side. TR 11,673-80. 1. Overcharges With respect to the overcharge claims, FOF alleges misconduct on the part of the King group essentially in two particulars: (1) contrary to the representation that KRC would vend interests to the NRFA on an arm's length "most favored nations" basis, the interests were not sold to FOF at prices that knowledgeable industry purchasers would pay or that King's affiliates would pay (TR 11,374-75), and (2) despite KRC's role as an investment advisor or manager of a discretionary investment account, KRC failed to disclose its purchase prices or markups, in violation of its duty of good faith and honest dealing (TR 11,407-08). FOF contends that AA did not attempt to find out whether KRC's sales to FOF were made as agreed (TR 11,376, 11,410, 11,420), or as required by KRC's position as an investment advisor or manager (TR 11,410-11). Moreover, when the comparative figures of the King group's costs and sales prices became known to AA, AA was allegedly required to disclose such matters to FOF, or to resign at least one account. AA contends that the FOF Board of Directors was solely responsible for the decisions to invest in various natural resource interests. TR 11,166. As auditors, it is argued that AA properly relied on the minutes of the Acapulco meeting as establishing the agreement of the parties (TR 11,174-75, 11,181-82), and the agreement reflected in the minutes was not violated: (1) because there were no sales by KRC to non-affiliates of the same or comparable properties (TR 11,154, 11,183-85), and transactions where FOF and KRC's affiliates both purchased interests from KRC appeared to be conducted on the same terms to both parties (Px-767; Px-768); or (2) because FOF paid a fair price for the interests (TR 11,218-27). AA contends that the King group was not an investment advisor to FOF (TR 11,247-53). Additionally, AA argues that it did not know any information concerning FOF's purchases until after they were consummated after January 1, 1969 for the 1968 sales by KRC and after January 1, 1970 for the 1969 sales by TCC. TR 11,244. Assuming AA had relevant 1344 knowledge of King's cost, they contend that the duty of confidentiality prohibited disclosure (TR 11,245) or that FOF's proposed alternative that AA should resign would not have better informed FOF (TR 11,246). 2. Revaluation FOF alleges that a fraudulent upward revaluation of certain natural resource interests in the Canadian Arctic in December 1969 resulted in excessive payments to redeeming shareholders and that an excessive management fee was paid by plaintiffs to IOS. FOF alleges that King arranged non-arm's length, non-bona fide sales of a small portion of the Arctic interests to non-independent third-parties to support a huge upward revaluation of the remainder of FOF's interest. It is further alleged that AA had reason to be suspicious of these specific aspects of KRC-arranged revaluations both prior to and immediately after the 1969 Arctic revaluation was consummated. TR 11,513. Yet AA failed to disclose these matters to FOF. Moreover, FOF contends that guidelines for the revaluation (or at least for a clean auditors' report following the revaluation, TR 11,532-33), were worked out between KRC and AA, and that the final transaction did not satisfy these guidelines, but that a clean opinion was nonetheless issued by AA (TR 11,549). FOF contends that the revaluation would not have been made or subsequently ratified by the Board of Directors without AA's approval of the guidelines and the sale as eventually completed (TR 11,555). FOF also contends that it relied on AA for a determination of the value of the Arctic interests (TR 11,521). Even assuming that AA did not certify as correct the new valuation, FOF argues that AA's disclosure of the method of revaluation was insufficient if such method did not fairly present FOF's financial state (TR 11,519, 11,611). AA's position boils down to a three-stage defense: (1) the FOF Board determined the necessity for a revaluation and the sufficiency of the partial sales (TR 11,297, 11,301); (2) there was no evidence before the event that the sales were not bona fide, and little available evidence thereafter (TR 11,261-62); and (3) if the sales to Mecom and COG were infirm, the fair value of the Arctic interests at the time was at least equal to the $8.01 per acre figure achieved by the revaluation (TR 11,256-57, 11,272). AA also challenges the sufficiency of the evidence of AA's intent (TR 11,275). 3. Common Law Fraud FOF argues that the same evidence of defendants' conduct in violation of the securities laws also amounted to common law fraud. AA's response is substantially similar to their denial of the securities law violations. TR 11,677. 4. Breach of Contract Finally, FOF claims that defendants breached their contract of engagement. The contract specifically required AA to bring to FOF's attention any irregularities discovered in their audit and pledged AA to use due care in conducting their audits in accordance with generally accepted auditing standards ("GAAS"). FOF contends that AA actually did discover numerous irregularities but failed to disclose them. FOF cites most of the GAAS as having been violated.[13] Furthermore, FOF alleges 1345 that AA breached another agreement to review the methodology of the revaluation, the arm's length nature of the sales underlying the December 1969 revaluation, and the values arrived at through the revaluation. TR 11,678. In response, AA denies that the use of the word "irregularities" in the engagement letters includes the conduct at issue, and denies that they breached the engagement letters in any way. AA also denies that there was any agreement obligating them to review the revaluation. 5. Damages The contentions concerning damages were separately discussed in the charge. TR 11,678-80. FOF measures the damages for the overcharge by "the difference between the price plaintiffs paid and either (1) the cost of the natural resource interests to [KRC] and [TCC], claiming that such costs reflected the best evidence of the price [FOF] should have paid for the interests at the time, or (2) the prices charged to other customers of [KRC] or [TCC]." TR 11,678. AA contests the damage issue on the grounds that FOF paid fair prices for speculative interests and that the prices charged to FOF were not higher than prices charged by KRC or TCC to other customers for the same or comparable properties. As a result of the revaluation, FOF claims that redemptions were made at excessive prices from December 26, 1969 (the date of the revaluation) until August 7, 1970. As the revaluation automatically increased the management fee payable to IOS, FOF also claims the increase in the fee as damage. With respect to the revaluation claim, AA placed primary reliance on FOF's alleged failure to prove that the $8.01 per acre valuation for the Arctic interests was too high; AA's summation termed this the only issue regarding the revaluation. TR 11,256-57. Additionally, AA contends that FOF's Board of Directors was required to perform the revaluation to maintain current per share values, that the Board did not rely on AA, and that the revaluation did not cause FOF's net redemption posture. Subject Matter Jurisdiction FOF bases subject matter jurisdiction upon section 22 of the 1933 Act, 15 U.S.C. § 77v (1976), section 27 of the 1934 Act, 15 U.S.C. § 78aa (1976), and diversity jurisdiction. The threshold question therefore concerns the applicability of the securities statutes to the conduct at issue. See generally Williamson v. Tucker, 645 F.2d 404 (5th Cir.), cert. denied, 454 U.S. 897, 102 S. Ct. 396, 70 L. Ed. 2d 212 (1981). Specifically, AA's motion challenges our ruling characterizing the natural resource interests as securities as a matter of law and renews its contention that some or all of the transactions at issue were wholly foreign. 1. Natural Resource Interests As Securities We denied summary judgment to AA on the question whether the natural resource interests purchased by FOF from KRC and TCC were securities. Memorandum Decision at 5-10 (December 18, 1980). In submitting the case to the jury, we ruled as a matter of law that the natural resource interests were securities. The 1933 Act defines a security as: [A]ny note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, [A]ny interest or instrument commonly known as a "security", or any certificate 1346 of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 15 U.S.C. § 77b(1) (1976). The 1934 Act defines a security in somewhat more specific terms as: [a]ny note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a "security"; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing[.] 15 U.S.C. § 78c(10) (1976). The listed categories are not mutually exclusive, Tcherepin v. Knight, 389 U.S. 332, 339, 88 S. Ct. 548, 554, 19 L. Ed. 2d 564 (1976); SEC v. C. M. Joiner Leasing Corp., 320 U.S. 344, 351, 64 S. Ct. 120, 123, 88 L. Ed. 88 (1943), and the two statutes are viewed as "essentially the same", Marine Bank v. Weaver, ___ U.S. ___, ___ n.2, 102 S. Ct. 1220, 1222 n.2, 71 L. Ed. 2d 409 (1982) (citing United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 847 n.12, 95 S. Ct. 2051, 2057 n.12, 44 L. Ed. 2d 621 (1975)). The test is a flexible one, based primarily upon the substance of the transaction. United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 849, 95 S. Ct. 2051, 2059, 44 L. Ed. 2d 621 (1975). "Each transaction must be analyzed and evaluated on the basis of the content of the instruments in question, the purposes intended to be served, and the factual setting as a whole." Marine Bank v. Weaver, ___ U.S. at ___ n.11, 102 S.Ct. at 1225 n.11. AA identifies seventeen different categories into which the 64 natural resource interests sold by KRC and TCC to FOF fit, and contends that each category had different characteristics which disqualify them as securities. As we found in our decision of December 18, 1980, however, all of the interests purchased were labeled fractional interests in oil, gas and mineral leases or permits. Nevertheless, AA contends that most of the individual natural resource transactions were not "investment contracts". FOF rests subject matter jurisdiction on several alternative theories: (1) the natural resource transactions were fractional undivided interests in oil, gas or mineral rights; (2) the transactions were investment contracts; and (3) the mutual fund shares issued by FOF and redeemed by FOF are securities.[14] We begin with the definitional language. Intern. Bhd. of Teamsters v. Daniel, 439 U.S. 551, 558, 99 S. Ct. 790, 795, 58 L. Ed. 2d 808 (1979). The natural resource interests in question are on their face fractional undivided interests in oil, gas and mineral rights. Px-613. See United States v. King, 560 F.2d 122, 125 (2d Cir.), cert. denied, 434 U.S. 925, 98 S. Ct. 404, 54 L. Ed. 2d 283 (1977). FOF did not purchase KRC's or TCC's entire interest in any of the 64 transactions as to which damages are claimed. See Px-740; Px-743. This situation falls within the express statutory definition. Accord Woodward v. Wright, 266 F.2d 108, 114 (10th Cir. 1959). "[It] is not inappropriate that promoters' offerings be judged as being what they were represented to be." SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 353, 64 S. Ct. 120, 124, 88 L. Ed. 88 (1943). We must also look at the purpose of the definition in question and the economic reality of the underlying transaction. Resort to the purpose of the statutory definition bolsters the application of the securities laws to the interests herein. 1347 Fractional undivided interests in oil, gas and mineral rights were included in the definition of securities only after Congress analyzed the potential hardship to oil industry development that might occur if this mode of financing was hindered. Id. at 352, 64 S.Ct. at 124. It was decided that specific protection was needed for the "form of splitting up of mineral interests which had been most utilized for speculative purposes". Id. Applying the basic principles of statutory construction, "courts will construe the details of an act in conformity with its dominating general purpose, will read text in the light of context and will interpret the text so far as the meaning of the words fairly permits so as to carry out in particular cases the generally expressed legislative policy". Id. at 350-51, 64 S.Ct. at 123. The uncontradicted intent of FOF was to use King's expertise, as it did that of other proprietary account advisors, to locate and purchase speculative investments in oil, gas and mineral assets. TR 6356, 6982. Px-80; Px-392. FOF had no means of valuing the assets proposed for investment and no means of participating in any work requirements. From the evidence, as restated in AA's own description and categorization of the interests, it appears that the majority of the separate purchases did not require FOF to perform any work, except possibly to pay for development costs contingent upon successful exploratory wells to be drilled by others. FOF was a money machine. It was not an oil, gas and mineral developer any more than it was a business participant in the various industries in which it purchased common stocks, bonds or notes. FOF's investments were not ordinary commercial financings between knowledgeable industry participants. Thus, one ground for our holding the 64 natural resource assets to be securities is that they were fractional undivided interests of the precise type intended to be included within the express definitional language of the securities laws. Unlike AA, we do not believe that the courts have cast aside the specific statutory definitions of securities in favor of one all-embracing test. Golden v. Garafolo, 678 F.2d 1139, 1144 (2d Cir. 1982). Indeed, the Intern. Bhd. of Teamsters v. Daniel decision cited by AA in support of the proposition that the test for an investment contract applies in place of other definitions looked first to § 2(1) of the 1933 Act and § 3(10) of the 1934 Act seeking a specific reference to pension plans. 439 U.S. at 558, 99 S.Ct. at 795. Finding no reference to pension plans, the Court considered respondent's argument "that an employee's interest in a pension plan is an `investment contract' ...." Id. The court declined to consider respondent's second alternative argument that an employee's interest constituted a "certificate of interest or participation in any profit-sharing agreement" both because the decision on review was decided solely on the presence of an investment contract[15] and because the investment contract test was at least as broad as the "certificate of interest" definition. Id. at n.11. We need not limit our holding to the fractional undivided interest ground, however, as the 64 natural resource interests are securities under the investment contract test stated in SEC v. W. J. Howey Co., 328 U.S. 293, 301, 66 S. Ct. 1100, 1104, 90 L. Ed. 1244 (1946): The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. A common enterprise exists where the "fortunes of the investors are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties". United States v. Carmen, 577 F.2d 556, 563 (9th Cir. 1978); see also Cameron v. Outdoor Resorts of America, Inc., 1348 608 F.2d 187, 193 (5th Cir. 1979). A "common enterprise" does not require "a pooling of the monies of various investors", or horizontal commonality; "a one-to-one relationship between an investor and an investment manager, that is vertical commonality, is sufficient to create a common enterprise". Troyer v. Karcagi, 476 F. Supp. 1142 & nn. 6-7 (S.D.N.Y.1979).[16] The requirement that an investor expect profits solely from the efforts of others has not been read literally, but involves an assessment of the significant managerial or entrepreneurial contribution of the promoter or a third party to the success of the venture. United Housing Foundation, Inc. v. Forman, 421 U.S. at 852, 95 S.Ct. at 2060; Williamson v. Tucker, 645 F.2d at 418, cert. denied, 454 U.S. 897, 102 S. Ct. 396, 70 L. Ed. 2d 212; SEC v. Aqua-Sonic Products Corp., 687 F.2d 577, at 582 (2d Cir. 1982). General partnerships or joint ventures are unlikely to come within federal securities jurisdiction, as general partners have legal rights and responsibilities for the conduct of the partnership's business, which provides access to information, at least latent control, and some protection. Williamson v. Tucker, 645 F.2d at 422-23, cert. denied, 454 U.S. 897, 102 S. Ct. 396, 70 L. Ed. 2d 212. If the facts and circumstances indicate that the substance of the investment belies its form, even general partnerships or joint ventures may be subject to the securities laws: If, for example, the partner has irrevocably delegated his powers, or is incapable of exercising them, or is so dependent on the particular expertise of the promoter or manager that he has no reasonable alternative to reliance on that person, then his partnership powers may be inadequate to protect him from the dependence on others which is implicit in an investment contract. Thus, a general partnership in which some agreement among the partners places the controlling power in the hands of certain managing partners may be an investment contract with respect to the other partners.... In such a case the agreement allocates partnership power as in a limited partnership, which has long been held to be an investment contract. A general partner or joint venturer who lacks the business experience and expertise necessary to intelligently exercise partnership powers may also be dependent on the investment's promoter or manager.... A genuine dependence on others might also exist where the partners are forced to rely on some particular nonreplaceable expertise on the part of a promoter or manager. Even the most knowledgeable partner may be left with no meaningful option when there is no reasonable replacement for the investment's manager. For example, investors may be induced to enter a real estate partnership on the promise that the partnership's manager has some unique understanding of the real estate market in the area in which the partnership is to invest; the partners may have the legal right to replace the manager, but they could do so only by forfeiting the management ability on which the success of the venture is dependent.... We must emphasize, however, that a reliance on others does not exist merely because the partners have chosen to hire another party to manage their investment. The delegation of rights and duties standing alone does not give rise to the sort of dependence on others which underlies the third prong of the Howey test.... All of this indicates that an investor who claims his general partnership or joint venture interest is an investment contract has a difficult burden to overcome.... 1349 A general partnership or joint venture interest can be designated a security if the investor can establish, for example, that (1) an agreement among the parties leaves so little power in the hands of the partner or venturer that the arrangement in fact distributes power as would a limited partnership; or (2) the partner or venturer is so inexperienced and unknowledgeable in business affairs that he is incapable of intelligently exercising his partnership or venture powers; or (3) the partner or venturer is so dependent on some unique entrepreneurial or managerial ability of the promoter or manager that he cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers. Id. at 422-24. As with the other definitions of securities, this is not an exclusive standard. The Williamson court noted that other factors may "give rise to such a dependence on the promoter or manager that the exercise of partnership powers would be effectively precluded". Id. at 424 n. 15. In SEC v. Aqua-Sonic Products Corp., the Second Circuit upheld the application of the investment contract test to an enterprise where investors purchased licenses to sell new dental devices. 687 F.2d at 578. Ultrasonic, a sister corporation of Aqua-Sonic, would be responsible for all sales of the dental products for the benefit of each licensee which accepted the "Offer to Act as Sales Agent." Id. at 579. In fact, all 50 licensees accepted Ultrasonic's offer. Id. at 580. "None of these licensees had any experience selling dental products." Id. Nonetheless, the licensees had the right to cancel the franchise upon 90-days written notice, had "ultimate control" over pricing, and had the right to inspect the records of the "optional sales agent," Ultrasonic. Id. at 579. The court held that the optional nature of the sales agency agreements between licensees and Ultrasonic did not disprove the existence of an investment contract: "it appears that the [Howey] Court focused not on whether it was somehow possible for an investor to profit without accepting the option [to service the investor's orange trees], or whether the investor had a bare theoretical right to reject the option, but rather on whether the typical investor who was being solicited would be expected under all the circumstances to accept the option, thus remaining passive and deriving profit from the efforts of others." Id. at 582-583. The court also held that formal retention by the investor of the right of control does not preclude a finding of an investment contract, absent some reasonable expectation that investors might exercise their retained rights "in a significant manner." Id. at 584-585. The evidence overwhelmingly demonstrates FOF's total reliance upon King, KRC and TCC to find, evaluate and price oil, gas and mineral interests. As previously stated, FOF had no ability to analyze the investments presented to them, no capacity to perform any work requirements, and no intent to be anything but a passive investor.[17] Both FOF and AA stressed King's unique skills especially in predicting the later meteoric price rise of natural resource assets and in finding or evaluating investments. 1350 FOF's entire natural resource investment program centered on the participation of the King group. FOF's dependence was induced and encouraged by King, whose own corporate documents represented that KRC was an investment advisor to FOF, and whose prospect summaries barely outlined the geologic and financial information necessary to an informed, independent investment decision. Whatever abstract rights FOF might have had, there is much more than the mere "delegation of duties standing alone" that the Williamson court found insufficient to establish the third prong of the Howey test. We conclude that the natural resource interests upon which FOF bases its claim are securities. 2. Foreign Transactions We previously considered AA's contention that there is no subject matter jurisdiction over FOF's claims due to the foreign nature of the transactions. Memorandum Decision at 13-16 (Dec. 18, 1980). Without rehashing the rationale of our decision denying AA's motion for summary judgment, the present procedural context requires that we elaborate somewhat on our earlier opinion. The Second Circuit has considered several transactions in which it was alleged that foreign elements predominate. See Bersch v. Drexel Firestone, Inc., 519 F.2d 974 (2d Cir.), cert. denied sub nom. Bersch v. Arthur Andersen & Co., 423 U.S. 1018, 96 S. Ct. 453, 46 L. Ed. 2d 389 (1975); Schoenbaum v. Firstbrook, 405 F.2d 200 (2d Cir. 1965) (en banc), cert. denied sub nom. Manley v. Schoenbaum, 395 U.S. 906, 89 S. Ct. 1747, 23 L. Ed. 2d 219 (1969); IIT v. Cornfeld, 619 F.2d 909 (2d Cir. 1980); IIT v. Vencap, 519 F.2d 1001 (2d Cir. 1975); Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (2d Cir. 1972). Nonetheless, a case by case inquiry is required. E.g., IIT v. Cornfeld, 619 F.2d at 918. Most of the purchases by FOF of fractional undivided interests in KRC's or TCC's oil, gas or mineral assets had few foreign elements. FOF and its parent company, IOS, were Canadian and the natural resource interests were physically located in both the United States and Canada. However, KRC and TCC, the companies that sold the natural resource interests to FOF, were American companies. Although the formal relationship between King and FOF was embodied in the minutes of a Board of Directors meeting which took place in Acapulco, the ongoing relationship which was established was conducted by the King group at their Denver office and through Denver personnel. KRC and TCC created the fractional undivided interests purchased by FOF by subdividing their own interests. Every individual purchase by FOF followed King's review and recommendation in the United States. A Maryland shell corporation, NRC, was the conduit for FOF's purchases and the funds were supplied from the Bank of New York. Title to the underlying properties and daily management control remained with KRC or TCC even after sale. With regard to the various revaluations, the entire scheme was carried out by King in conjunction with other domestic companies; the interests were allegedly purchased by Fox-Raff, Mecom, COG, Lakeshore, and Blakely-Wolcott. The guidelines for the revaluation were worked out by AA in Denver, Chicago and New York. FOF played almost no role in structuring the revaluations. In two specific instances, however, the transactions involved a foreign subsidiary of King, International Resources, Ltd. ("IRL"). In this regard, the instant case appears most similar to Leasco. In Leasco, meetings and negotiations at which numerous misrepresentations were made took place in the United States between a United States company, Leasco, and an English company, controlled by Maxwell. 468 F.2d at 1330. An agreement to commence a tender offer in England was reached between Leasco, the purchaser, and Maxwell, the seller, in the United States. Id. at 1332. The purchases that followed were not made by Leasco, however, but by a Netherlands Antilles subsidiary of Leasco, "N.V.", on the open market in England. Id. The Second 1351 Circuit held, "when substantial misrepresentations were made in the United States", Congress "wished to protect an American investor if a foreigner comes to the United States and fraudulently induces him to purchase foreign securities abroad". Id. at 1337. Although N.V. was formally the purchaser, "it would be elevating form over substance" to permit this transaction to avoid federal securities laws as N.V. was "part and parcel of Leasco in every realistic sense [and] Leasco remained at all times intimately involved in the transaction; the foreign entity was accepted by both sides as the alter ego of the American". Id. at 1338. A similar principle animates IIT v. Vencap, Ltd., 519 F.2d 1001 (2d Cir. 1974). The Second Circuit stated that Congress did not intend "to allow the United States to be used as a base for manufacturing fraudulent security devices for export, even when these are peddled only to foreigners". Id. at 1017. The court limited the breadth of the holding to situations where the fraudulent acts themselves, and not merely preparatory acts, occur in the United States. Id. at 1018. The IRL transactions involving the CSADC African diamond interests and Port Gentil Gabon, natural resource interests must be considered in the context of the ongoing managerial and advisory relationship between KRC, TCC and FOF. FOF was not looking to IRL, but to KRC in making its purchase: (1) IRL was a whollyowned subsidiary of KRC; (2) KRC's Denver office and personnel were involved in the IRL transactions; and (3) payment was made by FOF in the same manner and sent to the same place as in transactions with KRC. An issue in this case even more critical than the conduct of the King entities was the conduct of AA in providing accounting services to parties intimately involved in all phases of the case on both sides of every relevant transaction. AA audited KRC, TCC, and John King personally, and performed substantial services for FOF, IOS, and NRC in Denver, Chicago, and New York. The partner and manager in charge of the KRC audit in Denver also audited FOF's natural resource subaccount, in part using KRC's records. The Denver office performed substantial work on the natural resource interests, in coordination with the Swiss office of AA, which reviewed matters at IOS headquarters and FOF's executive offices in Ferney-Voltaire, France. AA also audited Raff and Mecom through AA's Seattle and Houston offices respectively. While AA's activities could not provide subject matter jurisdiction where none previously existed, they are among the weighty United States contacts which support the exercise of jurisdiction in this case. Primary Liability AA was found to be a primary violator of section 10(b) and section 17(a)(3) only with respect to the revaluation claims. 1. Section 10(b) and Rule 10b-5 Section 10(b) of the 1934 Act prohibits the use "in connection with the purchase or sale of any security ... [of] any manipulative or deceptive device or contrivances" and authorizes the SEC to prescribe rules and regulations enforcing the statutory stricture. To that end, Rule 10b-5 makes it "unlawful for any person,[[18]] 1352 directly or indirectly ... [t]o employ any device, scheme or artifice to defraud, [or] to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person". 17 C.F.R. § 240.10b-5 (1981). The elements of a 10(b) cause of action are: (1) a factual misrepresentation or an omission to state facts necessary to make statements not misleading; (2) materiality; (3) scienter; (4) reliance; and (5) causation of injury. E.g., Huddleston v. Herman & MacLean, 640 F.2d 534, 543 (5th Cir. 1981), cert. granted, ___ U.S. ___, 102 S. Ct. 1766, 72 L. Ed. 2d 173 (1982). In this case, the jury reasonably could find that AA undertook special duties in connection with the revaluation. AA was initially contacted by KRC concerning the revaluation. AA, in conjunction with King, established guidelines for accepting partial sales as a basis for writing-up the value of interests to reflect unrealized appreciation. FOF's interest was merely to do whatever satisfied AA. Thus, FOF's basic guidelines mirror AA's. It was AA's responsibility to determine whether the proposed revaluation would, in fact, satisfy FOF's guidelines as being arm's length in nature and involving "a sufficient percentage" of FOF Prop's holding. The FOF Board exercised little or no supervision of this process. AA had considerably more stringent ground rules for determining whether a revaluation based on a partial sale fairly presented the financial picture of FOF than the general statement of FOF's guidelines made in the 1969 Annual Report. All of the internal AA deliberations leading up to the December 23 telex reciting the proposed language for the IOS Growth opinion suggested that AA could not accept less than a 10% sale, 4% cash, and no appraisal as a basis for recognition of unrealized appreciation. AA's agreement in December 1969 not to qualify the IOS Growth report as of December 31, 1969 including the revaluation was an affirmative representation that the revaluation was at arm's length and involved a sufficient percentage of FOF Prop's holding in accordance with FOF's guidelines and that the financial statements fairly and accurately portrayed IOS Growth's position as of year end 1969. In both particulars, the jury reasonably could find AA's statement to be false or misleading. Additionally, both the IOS Growth and the FOF "subject to" opinions published in the 1969 Annual Reports state that the revaluations were reviewed by AA to determine that they were made in accordance with FOF's guidelines. This is misleading insofar as AA actually doubted or had every reason to doubt the arm's length character of the sales and the sufficiency of the partial sales as evidence of the value of the remainder of FOF's interest. The auditor's opinion is also misleading in stating that AA did not express an opinion as to the value of the interests. There is evidence that FOF relied almost entirely on KRC to value the interests and upon AA to confirm the fair accuracy of the value as fixed. The purpose of the partial sale was known to AA to be the valuation of FOF's mutual fund shares which were freely purchased or redeemed at a price equal to the fund's net asset per share. The effect of the revaluation upon the fund as a whole made it clearly material. There is a substantial likelihood that a reasonable investor would consider this important in deciding whether to sell or purchase FOF shares. See TSC Industries v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 2132, 48 L. Ed. 2d 757 (1976) (considering materiality in proxy context). AA's brief does not contest the materiality of the revaluation. Scienter may be shown by AA's actual intent to deceive or defraud, knowledge of the falsity of its representations or recklessness. Rolf v. Blyth Eastman, Dillon & Co., 570 F.2d 38 at 44-16, cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698; Lanza v. Drexel & Co., 479 F.2d 1277, 1300-02 (2d Cir. 1973) (en banc). A reckless misrepresentation, or reckless omission to state information necessary to make that which is stated not misleading, is one which disregards the truth or falsity of the information disclosed in light of a known danger 1353 or patently obvious danger. Rolf v. Blyth Eastman, Dillon & Co., 570 F.2d at 45, 47, cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698 (quoting W. Prosser, Law of Torts § 107 at 700 (4th ed. 1971)). This is consistent with the holding of Ernst & Ernst v. Hochfelder, 425 U.S. 185, 201, 96 S. Ct. 1375, 1384, 47 L. Ed. 2d 668 (1976), that liability under section 10(b) cannot be based upon negligence. Rolf v. Blyth Eastman Dillon & Co., 570 F.2d at 45 n.12, cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698. The jury reasonably could find that, at a minimum, AA did not have ample information concerning the arm's length character of the partial sales supporting the revaluation to commit itself to an unqualified opinion for IOS Growth in December 1969. Moreover, AA knew all the facts which reasonably suggested that the methodology and result of the 1969 Arctic revaluation was a sham and yet AA persisted in the misleading and incomplete disclosures outlined above as to the IOS Growth and FOF audit opinions. Finally, AA disregarded its affirmative duty to disclose to FOF material fraud discovered in its audit. It was reasonable for the jury to conclude that AA acted with requisite scienter in disregarding known and obvious risks to FOF by agreeing to issue an unqualified opinion as to IOS Growth and subsequently issuing the misleading IOS Growth and FOF auditor's opinions. FOF would not have made the sales resulting in the revaluation without AA's review of the methodology and issuance of a clean opinion for IOS Growth regarding the outcome of the December 1969 Arctic revaluation. Accordingly, AA's contention that the formal issuance of the auditor's opinion after the FOF Board approved the sales and revaluation precluded any claim of reliance is without merit. AA's alternative argument that disclaimer of its ability to appraise the investments in the auditors' opinions precluded reliance is unavailing. It is not claimed that AA computed the value of the interests sold. The disclaimer does not undercut FOF's reliance on the fact that AA had to have some basis for determining that the revaluation met FOF's guidelines and fairly presented FOF's financial picture. We leave the question of loss causation to the discussion of damages. 2. Section 17(a)(3) Section 17(a)(3) of the 1933 Act makes it unlawful for any person "in the offer or sale of any securities ... to engage in any transaction, practice or course of business which operates or would operate as a fraud or deceit upon the purchaser". Section 17(a)(3) thus parallels Rule 10b-5(c) except for the requirement in 17(a)(3) that the violation occur in the offer or sale to a purchaser. Section 17(a)(3) is narrower than section 10(b)'s "in connection with" standard, and AA contends that section 17(a)(3) is strictly limited to violations by offerors or sellers of securities. Federal courts at all levels have agreed with AA that § 17(a) is limited in its application to offerors or sellers. Aaron v. SEC, 446 U.S. 680, at 687, 100 S. Ct. 1945, at 1950, 64 L. Ed. 2d 611; Globus v. Law Research Serv. Inc., 418 F.2d 1276, 1283 (2d Cir. 1969), cert. denied 397 U.S. 913, 90 S. Ct. 913, 25 L. Ed. 2d 94 (1970); SEC v. First Financial Group, 645 F.2d 429, 436 n.12 (5th Cir. 1981); Gutter v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 1194, 1196-97 (6th Cir. 1981); SEC v. Allison, [Current] Fed.Sec.L. Rep. (CCH) ¶ 98,427, at 92,550 & n.6 (D.Ore. 1982); In re North American Acceptance Corp. Securities Cases, 513 F. Supp. 608, 618 (D.Ga.1981). Although AA "was not a `seller' in the most common sense of that word, that is, [it] was not the party who parted with the securities sold and received the consideration given in exchange", Lewis v. Walston & Co., Inc., 487 F.2d 617, 621 (5th Cir. 1973), the securities laws include as a seller entities which proximately cause the sale, id. at 622, or whose conduct is "a substantial factor in causing a purchaser to buy a security". Lawler v. Gilliam, 569 F.2d 1283, 1287 (4th Cir. 1978). FOF properly claims the status of a purchaser of securities owing to the redemption of its own mutual fund shares. 1354 But there is no basis in this record for finding AA to be a seller. AA was not an agent for the redeeming shareholders and did not promote the redemptions. In fact, there is evidence of significant exogenous economic factors inducing FOF's shareholders to cash in their investments. As an open-ended mutual fund, FOF was required to redeem shares presented to it. Although AA's conduct with respect to the revaluation was causally related to the price rise in FOF's shares, extending liability to the auditors of a mutual fund because their decisions affect the market price of the outstanding shares simply goes beyond the purview of section 17. Accordingly, we grant judgment notwithstanding the verdict on AA's primary liability under section 17(a)(3). Aiding and Abetting Liability The jury found AA liable for aiding and abetting violations of section 10(b) and all subsections of section 17(a). As we believe that controlling precedent provides a private right of action for FOF under both section 10(b)[19] and section 17(a)[20], we shall 1355 examine the sufficiency of the evidence. Neither party disputes the elements of the test for aiding and abetting: (1) fraud by the primary party (here the King group); (2) scienter of the alleged aider and abettor; and (3) substantial assistance by the alleged aider and abettor. IIT v. Cornfeld, 619 F.2d at 922. 1. Overcharges a. Primary Fraud To prove a primary fraud, FOF was required to show that King's conduct satisfied all the elements of a primary securities law violation. On this motion, however, AA challenges only the proof that King made an untrue statement of a material fact to FOF or failed to disclose material information necessary in order to make the statements that were made not misleading. Over 50 pages of AA's 640-page unsealed Memorandum of Law reviewed the evidence on this issue. The evidence supports a finding that King committed a primary fraud. The jury reasonably could find that the most favored nation pricing provision announced by King at the Acapulco meeting on April 5, 1968 was materially misleading and without substance. FOF claimed that comparable interests were not sold to them by King at prices that knowledgeable industry purchasers would pay or that King's affiliates would pay. If KRC or TCC did not sell interests in comparable properties to any purchasers except FOF and KRC's affiliates, and the most favored nation provision applied to non-affiliated, knowledgeable industry purchasers, King's statement was materially misleading. If none of the interests vended to FOF were comparable to interests sold by KRC or TCC to any other customers, it was materially misleading to fail to tell FOF that no effective pricing protection was implied. Of course, if the interests sold to FOF were comparable to those sold to affiliates or knowledgeable industry purchasers and the prices charged to FOF were higher than those paid by such parties the most favored nation provision was violated. AA contends that audit tests did show that sales of interests in the same properties to FOF and affiliated parties were made on the same terms. Px-160; Dx-K-11. However, the most favored nation provision is not limited to sales of the same properties, nor is it necessarily limited to sales to affiliates. AA's test is not conclusive as to either their knowledge or intent. Alternatively, the jury could find that the April 5 representations did not constitute the entire agreement of FOF and King. There is evidence that FOF was led to believe that the King group would have "a meaningful investment in the same properties" as FOF which is obviously not the case if interests are sold to FOF at prices which effectively eliminate KRC's or TCC's risk. There is also evidence that the FOF-King agreement contemplated purchase prices set at KRC's cost for interests purchased by KRC for immediate resale to FOF and cost plus appreciation where time or intervening events justified an increase in value. Thus, the inadequate disclosures to FOF in each offering of interests by the King group would be materially misleading. Most important of the representations not recorded in the April 5 minutes is the assumption by the King group of investment advising or discretionary investment management responsibilities for FOF. As an investment advisor or manager of FOF's discretionary natural resource investment account, the King group would have a duty to act in FOF's best interests and avoid a conflict of interest. It is not necessary to decide whether the King group would have to disclose its costs per se, or the non-comparability of the interests sold to various purchasers (the lack of protection of the most favored nation provision) or other factors affecting the value of the interests (i.e., the holding period, discoveries on surrounding acreage, etc.) required to permit FOF to make an intelligent investment decision in 1356 dealing with KRC or TCC as vendors, as they did not make any such disclosures. It is enough that a person with a duty to speak fails to do so. Chiarella v. United States, 445 U.S. 222, 230, 100 S. Ct. 1108, 1115, 63 L. Ed. 2d 348 (1980).[20.5] The evidence also permits the inference that King had the requisite scienter, and that the elements of reliance and causation were well-established, to constitute a primary fraud. b. AA's Scienter An accountant's liability for aiding and abetting securities fraud may, at the very least, be predicated upon "actual knowledge" of the fraud. Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575. See Edwards & Hanley v. Wells Fargo Securities Clearance Corp., 602 F.2d 478, 484-85 (2d Cir. 1979) (quoting Woodward v. Metro Bank, 522 F.2d 84, 97 (5th Cir. 1975)). AA can be found to have actually known that the prices charged to FOF by KRC or TCC were inconsistent with the most favored nation provision insofar as it provided for pricing parity of FOF and King's other knowledgeable industry purchasers (both affiliated and non-affiliated). Alternatively, AA's actual knowledge of a primary fraud may be inferred from its belief that the King group was an investment advisor to FOF, its recognition of the high markups on interests sold to FOF, and its knowledge of the terms revealed to FOF prior to its purchase. Although recklessness suffices to establish scienter for primary violations of section 10(b), Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575 (citing IIT v. Cornfeld, 619 F.2d at 923), it is not clear that recklessness satisfies the scienter element of an aiding and abetting claim absent a fiduciary duty owed by the alleged aider and abettor to the defrauded party, id. (citing Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d at 44 & n.9, cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698). Judge Gurfein wrote in Edwards & Hanly v. Wells Fargo Securities Clearance Corp., that "something closer to an actual intent to aid in the fraud" is necessary in an aiding and abetting context without any fiduciary relationship. 602 F.2d 478, 485 (2d Cir. 1979); see also Decker v. Massey-Ferguson, Ltd., 681 F.2d 111 at 120 (2d Cir. 1982). Courts do not generally regard the accountant-client relationship as a fiduciary one. Nonetheless, a recklessness standard has been applied to accountants whose audit or opinion letter is allegedly misleading, in an action by third parties whose reliance upon such pronouncements is foreseeable. Oleck v. Fisher, [1979 Transfer Binder] Fed.Sec.L. Rep. (CCH) ¶ 96,898, at 95,699 (S.D.N.Y. 1978), aff'd, 623 F.2d 791 (2d Cir. 1980); In re Investors Funding Securities Litigation, [1980 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 97,717, at 98,763 (S.D.N.Y.1980). In Oleck v. Fisher, both the District and Circuit Courts referred to the accountant's duty to disclose as triggering application of a recklessness standard. [1979 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 96,898 at 95,699, aff'd, 623 F.2d 791. We recognize, however, that the auditor's duty of disclosure is ordinarily circumscribed by the auditor's limited responsibilities: The relationship itself is occasional. The auditor's access to information about the firm depends to a greater or lesser degree on the firm's producing documents under its control. The auditor's benefit from the relationship consists in a fee for professional services. While the auditor may know that persons dealing with the firm and the firm's own directors will rely in some ways on the audit opinion, rarely if ever can the firm itself be expected to base investment decisions on what an audit reveals. See Competitive Associates, Inc. v. Laventhol, Krekstein, Horwath & Horwath, 516 F.2d 811, 815 (2d Cir. 1975). Reckless disregard of this narrow duty is conduct of an extreme sort and should be found sparingly.... 1357 Pegasus Fund, Inc. v. Laraneta, 617 F.2d 1335, 1340-41 (9th Cir. 1980). Nonetheless, AA's conduct under the unusual circumstances of this case easily meets a recklessness test. The investment strategy of FOF Prop to establish a series of discretionary accounts with investment advisors was well-known to AA. Although some deviation from this course was conceivable, the baseline relationships one could reasonably expect to find or to test for would be an investment advisor-advisee relationship. Indeed, King's relationship to FOF was proposed to be structured in this fashion and, in fact, largely conformed to this pattern. Everywhere one turned, however, there were conflicting signals about the relationship. The King group was an advisor, then it was not. An IOS subsidiary was the advisor, but FOF made the investment decisions and neither FOF nor IOS had any geological expertise, or, more important, any information on which to base an informed, independent investment decision. The records at FOF were so scanty that audits were performed at the Denver headquarters of KRC based upon KRC records. The jury could find that the offer of natural resource interests by KRC or TCC and the acceptance by FOF was a mere formality. Even the minutes of the April 5, 1968 Acapulco meeting are ambiguous. To perform its audit, AA had to determine FOF's internal accounting procedures, the relationship between the King group and FOF, and the purchase procedures. Yet AA asked the King group and did not ask FOF although FOF, and not King, was the relevant client. Moreover, AA failed to check King's answers with FOF. The jury reasonably could find that AA's conduct was a gross breach of its obligation to FOF under GAAS, GAAP and the letter of engagement. Although FOF management bears primary responsibility for business decisions, the auditor must inform the client when the basic terms of business dealings are so confused as to effectively prevent any conclusions as to the client's financial picture. AA's difficulties proved that FOF was pursuing an investment course on certain assumptions without any assurance that the King group governed their conduct by the same assumptions. AA's persistent inability to identify the terms upon which its audit must have been based could not be recognized independently by FOF. In these sui generis circumstances, FOF did "base investment decisions on what an audit reveal[ed]". See Pegasus Fund, Inc. v. Laraneta, 617 F.2d at 1341. Each audit stated that the financial condition of FOF was fairly stated and internal controls were adequate, based almost entirely on King's records and King's account of the relationship. Thus, the jury reasonably could find the second element of aiding and abetting liability satisfied by AA's actual knowledge or recklessness. c. Substantial Assistance The third element of aiding and abetting liability requires proof that AA associated itself with the fraud or participated in it as something they wished to bring about. IIT v. Cornfeld, 619 F.2d at 922, 925 (quoting United States v. Peoni, 100 F.2d 401, 402 (2d Cir. 1938)). AA's activities must have proximately caused FOF's damage; a "but for" causal connection is insufficient to prove substantial assistance. Edwards & Hanly v. Wells Fargo Securities Clearance Corp., 602 F.2d at 484. We have no doubt that AA's failure to disclose the fraud or failure to understand the King-FOF relationship proximately caused FOF's damage. Although it was within FOF's business discretion to enter into the arrangement with King, and it was King's decision to implement his questionable practices, AA had direct responsibility to FOF to determine whether the records presented fairly FOF's financial position and to disclose irregularities which the auditors happened upon. This is not merely an issue of whether the interests were carried on FOF's books at cost, as AA contends, but whether on the basis of the available records the relationships of the contracting parties were consistent with the financial picture presented. Nor does this issue call into question any problem of confidentiality. 1358 KRC told AA that the relationship was one thing and AA never bothered to find out the truth by asking its client FOF. In these highly unusual circumstances, AA's failure to disclose the various problems that it discovered pretermitted FOF's discovery of the fraud and lulled FOF into a false sense of security. 2. Revaluation a. Primary Violation The evidence of a primary violation of section 10(b) by the King group in the revaluation of FOF's shares is considerable. AA only disputes the fact that King's fraud was "in connection with" the purchase or sale of a security over which we have jurisdiction. That argument is rejected above. See p. 1352 supra. The King group promoted the revaluation and AA and King both played a role in formulating FOF's revaluation policy. These guidelines provided that a partial sale could serve as a basis for a write-up for unrealized appreciation only if the sale was at arm's length and involved a "sufficient percentage" of FOF Prop's holding. King's arrangement of the Mecom and COG purchases of 9% of FOF's interests involved knowing omissions and misstatements of material facts and violated the guidelines he helped to establish. King's motive is transparent. The reliance and causation requirements are amply supported in the record. With respect to the claimed primary violation of section 17(a) by the King group, however, we do not find any basis for finding the King group liable to FOF in the Mecom/COG transaction. See pp. 1351-1352, supra. Section 17(a) only applies to the conduct of offerors or sellers of securities. King was neither an offeror nor seller of securities to FOF in the revaluation transactions. If anything, King was a purchaser from FOF. Accordingly, we grant judgment notwithstanding the verdict for aiding and abetting violations of section 17(a). b. AA's Scienter AA knew that the 1969 Arctic revaluation was promoted and arranged by King for FOF. AA had actual knowledge of one fraudulent revaluation of FOF's interests orchestrated by King before the 1969 Arctic revaluation. AA had established its own internal ground rules for approval of the revaluation. The proposed terms of the December 1969 transaction did not satisfy AA's requirements. AA also had actual knowledge of Mecom's inability to undertake the financial burden of the purchase underlying the revaluation. Shortly after it approved the revaluation as being consistent with the guidelines of FOF and committed itself to an unqualified auditor's opinion for IOS Growth, AA learned of another fraudulent revaluation not concerning FOF orchestrated by John King. Thus, AA had actual knowledge of two prior fraudulent revaluations one directly involving FOF accomplished in substantially identical fashion (advance of down payment and side agreement covering amounts due thereafter), and every reason to doubt the arm's length nature of the 1969 Arctic proposal. The jury reasonably could find that AA had actual knowledge of King's primary fraud. We also find support for a finding of gross recklessness. AA conspicuously failed to test the arm's length nature of the transactions by asking Mecom whether there were any side deals. Although AA knew that FOF was relying on them to determine whether the revaluations were made in accordance with FOF's guidelines, AA did not inform FOF at any point about either the factual basis for its suspicions regarding the revaluation or its actual knowledge of King's prior fraudulent revaluations. FOF was thus recklessly deprived of crucial information concerning the revaluation which it could not otherwise discover. c. Substantial Assistance FOF was relying heavily on AA to develop a methodology to justify the revaluation which King proposed and the FOF 1359 Board found advisable. AA consistently failed to enforce the terms which it regarded as minimally acceptable to recognize unrealized appreciation. AA also failed to disclose to FOF its well-founded doubts about the present sale so that FOF might independently consider whether the sale met its own AA and King-created guidelines. There is evidence that AA's conduct was a direct and proximate cause of FOF's decision to approve the revaluation. Common Law Fraud The jury found AA liable for common law fraud in regards to both the overcharge and revaluation claims. Recovery for fraud can be based upon a material misrepresentation made with scienter which induces reliance to the detriment of the party to whom the misrepresentation is directed. E.g., Shores v. Sklar, 647 F.2d 462, 468 (5th Cir. 1981); Van Alen v. Dominick & Dominick, Inc., 441 F. Supp. 389, 403 (S.D. N.Y.1976), aff'd, 560 F.2d 547 (2d Cir. 1977); Camelot Group, Ltd. v. W. A. Krueger Co., 486 F. Supp. 1221, 1228 n.21 (S.D.N.Y.1980). Non-disclosure of material information, or omissions to disclose matter necessary to make other representations not misleading, are also actionable under the common law, provided "there was a fiduciary relationship between the parties" or a duty of disclosure arising from a "relation of trust and confidence" between the parties. Chiarella v. United States, 445 U.S. at 228, 100 S.Ct. at 1114; Frigitemp Corp. v. Financial Dynamics Fund, Inc., 524 F.2d 275, 283 (2d Cir. 1975).[21] At a minimum, a claim of fraud 1360 for a failure to disclose may be based on defendant's knowledge that plaintiff was acting under a reasonable, mistaken belief with respect to a material fact. Id., Jeffrey Resources 1973 Exploration Program v. Monitor Resources Corp., 84 F.R.D. 609, 610 (S.D.N.Y.1979); Green v. Hamilton Intern. Corp., 437 F. Supp. 723, 729 (S.D.N.Y.1977). Recklessness satisfies the scienter element of common law fraud. Transitron Electronic Corp. v. Hughes Aircraft Co., 649 F.2d 871, 876 (1st Cir. 1981); Ainger v. Michigan General Corp., 476 F. Supp. 1209, 1227-28 (S.D.N.Y.1979), aff'd, 632 F.2d 1025 (2d Cir. 1980); Morse v. Swank, Inc., 459 F. Supp. 660, 667 (S.D.N.Y.1978); Rousseff v. Dean Witter & Co., Inc., 453 F. Supp. 774, 778 (N.D.Ind.1978). A recent Seventh Circuit case described the auditor's common law duty as requiring use of "professional skill to follow up any signs of fraud that he discovers in the audit ... [a]nd if such skill [is] not used, then the audit reports to the client will contain misrepresentations, either negligent or, if the auditor knows that the representations in the reports are untruthful or is indifferent to whether or not they are truthful, fraudulent." Cenco, Inc. v. Seidman & Seidman, Nos. 81-2126, 81-2264, slip op. at 6-7 (7th Cir. March 26, 1982). AA had a duty to FOF to review the basic agreements underlying FOF's business operations with the King group, a duty to state publicly whether the financial statements prepared by FOF fairly presented FOF's financial position, a duty to disclose inadequacies in FOF's internal accounting procedures, and a duty to disclose fraud that it happened upon. Moreover, AA knew that FOF would rely on its opinion at least as the opinion reflects the above listed duties. The common law fraud claim concerning the overcharges is based upon AA's misleading clean opinions on the year end 1968 and mid-year 1969 FOF and FOF Prop audits and upon AA's failure to disclose conflicting pricing expectations in the relationship between KRC, TCC and FOF. It was during the FOF year end 1968 audit that AA first became aware of the magnitude of the markups being charged by King on sales to FOF. AA's failure to clarify the parties' differing conceptions of the relationship and pricing arrangement materially affected the fair presentation of FOF's financial condition. To uphold the jury verdict it is not necessary to determine conclusively whether the December 31, 1968 and June 30, 1969 auditor's opinions were false or merely misleading for failure to reflect or resolve the patent ambiguities in the relationship between the King entities and FOF. It may reasonably be found on the evidence that the clean opinions were materially misleading. Alternatively, the jury reasonably could find that AA failed to disclose FOF's inadequate accounting safeguards despite a duty to do so. As we previously determined that AA had actual knowledge of King's primary fraud concerning the overcharges, AA may also be found to have failed to disclose such acts to FOF despite a professional duty and an express contractual obligation to do so. The jury verdict that AA was primarily liable for securities violations in connection with the revaluation rested on AA's special duties. The same duties and acts suffice to prove AA's misrepresentations or omissions for common law fraud. AA misses the mark in arguing that scienter was not proven because of the absence of an organized market pricing mechanism (like the Stock Exchange) for natural resource interests, the potential for rapid fluctuations in prices of oil and gas interests, and the prevalence of high markups in the industry. FOF was not a knowledgeable industry purchaser participating 1361 as an equal in the rough-and-tumble world of oil and gas speculation. Rather, FOF was a passive investor willing to pay going rates for assets with the protection of either the most favored nation clause (as described at p. 1355, supra) or an obligation of fair dealing and honesty on the part of the vendor of natural resource interests. An understanding of the agreement between King and FOF and not the general industry practices was central to AA's analysis of FOF's financial posture. It is in this area that AA failed to fulfill its obligations and not with respect to its knowledge of industry practices or King's perception of the agreement. There is evidence, analyzed above, which reasonably supports a finding of AA's actual knowledge or recklessness which satisfies the scienter requirement as to both the overcharge claims and the revaluation claims. It is readily apparent that FOF would rely on AA to properly perform its duties as outlined above. Nonetheless, AA argues with respect to the overcharge claim that FOF had no right to know King's cost figures and AA had no right to reveal such confidential information, so FOF could not have relied upon AA's failure to reveal King's costs. AA's invocation of the shield of client confidentiality conveniently disregards the fact that KRC's and TCC's records were used for the NRFA audits and that on numerous occasions AA sought information about the KRC/FOF relationship from the King group. Assuming that the duty of confidentiality applies in this instance, when an auditor finds its independence in question, or a conflict of interest developing, there was testimony that it may: (1) strongly encourage one client to make the necessary disclosure; (2) disclose that it has relevant information not available to the other client; or (3) resign from one account. AA did none of these. Moreover, it is not clear that AA fully recognized the delicate position it was in, only because it recklessly failed to resolve the uncertainties surrounding the King/FOF business relationship. The jury reasonably could find that FOF continued to purchase natural resource interests at King's asking price and performed the revaluation in reliance upon AA's misrepresentations or omissions. AA argues more strenuously that FOF's reliance was unjustifiable. If the material information that it was AA's duty to disclose was peculiarly within AA's knowledge or FOF had no independent means of ascertaining the truth, the Board of Directors of FOF may justifiably rely on AA without investigation. Mallis v. Bankers Trust Co., 615 F.2d at 80. If the material information that it was AA's duty to disclose was available to FOF or FOF was placed on guard (or "practically faced with the facts") so that failure to investigate constituted recklessness or worse, FOF's reliance was unjustifiable. Id. at 80-81. See generally Dupuy v. Dupuy, 551 F.2d 1005, 1013-24 (5th Cir.), cert. denied, 434 U.S. 911, 98 S. Ct. 312, 54 L. Ed. 2d 197 (1977). FOF's Board of Directors and top management may not have done all that they should either in deciding to enter an investment relationship with King or in scrutinizing certain aspects of their ongoing relationship. However, FOF's lapses in certain areas do not excuse AA's failure to perform its duties in other areas which a director reasonably can rely on an auditor to do. With respect to the overcharge claims, it was AA's duty to review the arrangement underlying FOF's numerous purchases from KRC and TCC, whether such agreements were written or oral. AA could not assume that FOF's understanding of the agreement was the same as King's. The FOF Board of Directors was not required to guess that AA had been unable to identify the key terms of the KRC/TCC-FOF relationship except by asking the King group for clarification, nor could it guess that the answer received would be materially different from the conception of the Board or the available documents. The FOF Board justifiably relied upon AA's reputation and standard audit practices to review such arrangements. Qualification of financials or reported internal accounting deficiencies would put the Board on notice that some investigation was required. Less formal queries might also constitute notice. But in this case no 1362 notice was received by the Board. Publicly available information might also put FOF on notice that further inquiry was required. Contrary to AA's assertion, there is nothing in the KRC Annual Reports which would "obviously" put FOF on notice of the profits being made on sales to FOF by KRC and TCC. Px-585; Px-586. AA knew KRC's and TCC's costs and the prices being charged to FOF and to other customers of KRC or TCC. FOF only knew the prices it paid. There is conflicting evidence whether the cost of the Canadian permits to KRC was publicly available. Nevertheless, the information which was not disclosed regarding the alleged overcharges was within AA's knowledge, not readily ascertainable by FOF, and within AA's duty to disclose. The argument that FOF's reliance upon AA was unjustifiable is equally weak in the case of the revaluations, where AA played an active role in developing the guidelines for approval of a revaluation based upon unrealized appreciation established by a partial sale. The deal would not have been consummated without AA's express commitment not to qualify the IOS Growth year end 1969 report. AA's representation reflected the conclusion that the partial sale proposed by King would satisfy FOF requirements, when AA knew or recklessly failed to discover that the partial sale would not qualify under even the broad standard formally adopted by FOF. Yet AA knew about Fox-Raff, Blakely-Wolcott, the precarious financial condition of Mecom, and the loan arrangement by King for COG. FOF did not know any of this information and could not have discovered it independently of AA. The addition of the words "subject to" in the 1969 FOF Annual Report was neither soon enough nor complete enough to avoid substantial damage to FOF. The jury reasonably concluded that FOF's reliance was not unjustifiable regarding both the overcharge and revaluation claims. Breach of Contract 1. Applicable Law AA argues that Swiss law is applicable to the breach of contract claim because the engagement letters of December 11, 1968 and December 4, 1969 were sent over the signature of Arthur Andersen & Co. on Zurich letterhead to IOS, Ltd. in Zurich. The mechanical application of the law of the place of making of a contract has been discarded by New York. International Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 382, 300 N.Y.S.2d 817, 825, 248 N.E.2d 576, 582 (1969); Hormel Intern. Corp. v. Arthur Andersen & Co., 55 App. Div.2d 305, 306, 390 N.Y.S.2d 457, 458 (2d Dept. 1977). It is thus significant that the 1968 letter identifies the New York office as bearing responsibility for the FOF Prop report and the 1969 letter notes that AA's New York office will prepare the FOF Prop and IOS Growth opinions. It is not necessary to repeat the substantial role played by AA partners in Denver and Chicago, as well as New York. We believe that New York law could apply to this case.[22] Moreover, even if Swiss law might apply, the law of the forum may be applied unless foreign law is litigated by the parties. Vishipco Line v. Chase Manhattan Bank, N. A., 660 F.2d 854, 860 (2d Cir. 1981). The complaint pleaded a contract claim in the alternative under the law of New York, Switzerland or France. Neither party attempted to prove the law of a foreign forum in the course of the trial or raised the issue in requests to charge. We thus do not have to apply Swiss law and do not reach the sharply contested issue whether third-party beneficiaries are barred from suit on a contract in Switzerland. 2. Statute of Limitations AA contends that the breach of contract claims are essentially malpractice claims and that the three-year tort statute of limitations applies rather than the six-year provision 1363 for contracts. As this suit was commenced on February 4, 1975 and the letters of engagement were dated December 11, 1968 and December 4, 1969 (although the latest activities at issue herein occurred in mid-1970), AA argues that the breach of contract claims are time-barred. We denied summary judgment on this issue, stating that FOF is "entitled to attempt to prove at trial that [AA] breached its contractual duties to [FOF]". New York courts, emphasizing that the reality of the action or the remedy sought and not its form or theory of liability must determine the applicable statute of limitations, e.g., Sears Roebuck & Co. v. Enco Assocs., Inc., 43 N.Y.2d 389, 394-95, 401 N.Y.S.2d 767, 770, 372 N.E.2d 555, 557 (1977); In re Paver & Wildfoerster, 38 N.Y.2d 669, 674-75, 382 N.Y.S.2d 22, 24-25, 345 N.E.2d 565, 568 (1976), have not settled upon a single time period as applicable to professional malpractice. The Court of Appeals has ruled that "claims by owners against architects arising out of the performance or nonperformance of obligations under contracts between them are governed by the six-year contract Statute of Limitations". Sears Roebuck & Co. v. Enco Assocs., Inc., 43 N.Y.2d at 395, 401 N.Y.S.2d at 770, 372 N.E.2d at 558. The broad rationale for the decision is not limited strictly to owner-architect squabbles: All obligations of the architects here, whether verbalized as in tort for professional malpractice or as in contract for nonperformance of particular provisions of the contract, arose out of the contractual relationship of the parties i.e., absent the contract between them, no services would have been performed and thus there would have been no claims. It should make no difference then how the asserted liability is classified or described, or whether it is said that, although not expressed, an agreement to exercise due care in the performance of the agreed services is to be implied; it suffices that all liability alleged in this complaint had its genesis in the contractual relationship of the parties. Id. at 396, 401 N.Y.S.2d at 770-71, 372 N.E.2d at 558. Cf. Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259, 263-264, 11 N.E.2d 902; see Prosser, Torts § 92, p. 613 (4th ed. 1971). However, the Sears court expressly denied any intent "to disturb the holdings in the line of cases that deal with claims for personal injuries for malpractice on the part of members of one of the professions" citing N.Y. CPLR § 214(6) (McKinney) (1972). 43 N.Y.2d at 395, 401 N.Y.S.2d at 770, 372 N.E.2d at 558 (emphasis added); see also In re Paver & Wildfoerster, 38 N.Y.2d at 675, 382 N.Y.S.2d at 25, 345 N.E.2d at 568. In a case decided less than a year before Sears, the Court of Appeals applied the six-year period to a claim of breach of loyalty under an employment contract, distinguishing cases "involving causes of action which stem from the breach of a defendant's duty to use due care", which are governed by the three-year statute of limitations for negligence. Western Electric Co. v. Brenner, 41 N.Y.2d 291, 294, 392 N.Y.S.2d 409, 411, 360 N.E.2d 1091, 1094 (1977); accord, Union Bank v. HS Equities, Inc., 423 F. Supp. 927, 929 (S.D.N.Y.1976); Hartford Fire Ins. Co. v. Callanan Marine Corp., 389 F. Supp. 436, 439 (S.D.N.Y.1973). One of the two cases distinguished by the Western Electric court was Carr v. Lipshie, 8 App.Div.2d 330, 187 N.Y.S.2d 564 (1st Dept. 1959), aff'd, 9 N.Y.2d 983, 218 N.Y. S.2d 62 (1961). Carr held that an action against accountants for failure to properly perform its audit services must be brought within the three-year period "where the contracting party either expressly or impliedly promises to perform services of the standard generally followed in the profession or promises to use due care in the performance of the services to be rendered", although in dicta it stated that the six-year period might apply "where a specific result is guaranteed by the terms of the agreement". Id. 8 App.Div. at 332, 187 N.Y.S.2d at 566-67, aff'd, 9 N.Y.2d 983, 218 N.Y.S.2d 62. In re Investors Funding Corp., [1980 Transfer Binder] Fed.Sec.L. Rep. (CCH) ¶ 97,696, at 98,659-60 (S.D.N.Y. 1980), applied the Carr holding to an accountant's alleged liability for breach of 1364 contract in performing accounting services. Judge Connor declined to find that Sears altered the rule of Carr. The most recent New York State case concerning malpractice limitations also applies Carr and distinguishes Sears. Adler & Topal, P. C. v. Exclusive Envelope Corp., 84 App.Div.2d 365, 367-68, 446 N.Y.S.2d 337, 338-39 (2d Dept. 1982), dismissed two counterclaims against accountants for failure to exercise ordinary care and breach of an oral contract by failing to exercise the ordinary care required of accountants based upon the three-year limitations period. The informal, oral agreement in Adler & Topal was contrasted with the detailed, written agreement in Sears. Once again, however, the broad language of Justice Thompson is not limited to the facts of Adler & Topal: It is difficult to conceive of any situation in which an accountant would render services to a client without some sort of bare bones agreement, explicit or implicit. The potential client must request the accountant to perform certain tasks or must agree to let the accountant do them if the accountant solicits him as a customer. But surely such a simple contract cannot convert all ordinary malpractice actions into contract claims. Such a holding would practically read the specific malpractice provisions out of CPLR 214, thus making the statutory provisions surplusage. It would be inappropriate to permit simple malpractice claims, which have their true genesis in negligence, to be converted to contract claims on the basis of such a simple "contractual" relationship. 84 App.Div.2d at 367, 446 N.Y.S.2d at 339. The engagement letters are somewhat more formal and detailed than the oral agreement in Adler & Topal, but significantly less precise in describing AA's duties and the specific uses to which the audit information would be put than the architect's contract in Sears. The engagement letters generally require the exercise of ordinary care consistent with GAAS and GAAP, but do contain a specific representation that any irregularities that were discovered by AA would be revealed to FOF. Obviously, too, the suit concerns only one of pecuniary loss and not personal injury. On balance, we find that AA's specific undertaking to reveal irregularities is actionable as a contractual duty separate and independent from the obligation to use due professional care in its audits. White v. Guarente, 43 N.Y.2d 356, 362-63, 401 N.Y.S.2d 474, 478, 372 N.E.2d 315 (1977), describes an accountant's assumption of the task of auditing and preparing tax returns as imposing a duty "arising out of contract or otherwise, to act with care if he acts at all". FOF's breach of contract claim is not solely concerned with violation of GAAS and GAAP or the objective test of reasonableness. AA's failure to disclose to FOF any irregularities actually discovered in the course of its audit is a breach of a specific, material term of the engagement letter.[23] We find Western Electric instructive although a duty of loyalty is ordinarily owed to employers by employees whether or not an employment contract is made, the Court of Appeals applied a six-year limitations period in light of the express employment contract. AA may have had a general duty to watch out for fraud, and to exercise its professional judgment in deciding how to deal with fraud if it was discovered, but the engagement letter specifically obligates AA to disclose to FOF any irregularities that it discovers. As we previously held that a jury reasonably could find that AA actually knew of King's fraud concerning the overcharges and the December 1968 Arctic revaluation, but did not disclose the information to FOF, the question of a breach of the express agreement to disclose irregularities was properly before the jury.[24] 1365 Jury Instructions AA asserts numerous errors in the charge to the jury. Several of AA's claimed legal errors in the charge have been discussed above in relation to the adequacy of proof concerning the substantive claims.[25] The decision not to require the jury to determine the relative fault of various non-parties is amply discussed in our prior Memorandum Decision of December 15, 1981 and at pp. 1381-1382 infra. Several other contentions are frivolous and citation to the records is sufficient discussion.[26] The remaining rulings are discussed 1366 below. Where possible, we will discuss the separately stated errors under a common heading. 1. AA's Duty AA contends that the charge "failed adequately to instruct the jury" concerning AA's duty to disclose information to FOF. Specifically, AA argues that the charge did not provide guidance as to any special relationship between accountants and clients necessary to trigger a duty to disclose. Given the extensive reliance by counsel for both parties on accounting industry standards and tasks, the duties of the parties were set out in a special section of the instructions, so that they would not be lost in the discussion of the elements of securities actions. The instruction described the auditor's role, as distinct from the responsibilities of FOF's financial officers: At a minimum, independent auditors verify the addition and subtraction of its client's bookkeeper and examine the accounting procedures and practices and internal financial control mechanisms of its clients. An independent auditor is supposed to be an outsider, independent of the client's management. After examining the financial statements prepared by the client, in accordance with generally accepted auditing standards, the auditor expresses an opinion as to whether such financial statements at a particular date and the reported results of particular operations for a particular period have been fairly presented by the client. TR 11,703-04. This largely incorporated AA's Request # 40. The charge further elucidated AA's baseline responsibility "to present a full and fair picture of its client's financial conduct" and the different degrees of responsibility depending upon an accountant's intent and the problems posed by the engagement, particularly relevant to the aiding and abetting claim. See Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575. Edwards & Hanly v. Wells Fargo Securities Corp., 602 F.2d at 485; AA's Requests # # 45-46. The instructions also stated the significance of evidence concerning GAAS and GAAP. The jury was told that the consensual, self-regulating accounting standards were not a substitute for the substantive standards under the securities laws. AA would have us charge that compliance with industry standards was "highly persuasive", based upon the language and not the holding in United States v. Simon, 425 F.2d 796, 806 (2d Cir. 1969). Our charge gave the jury leeway to resolve the factual dispute whether (and what) procedures and standards were violated, without favoring one side or the other. The charge adequately and completely explained both the accountant's ordinary role and the extraordinary circumstances which might give rise to a higher standard of conduct. The jury was instructed to apply these concepts in assessing AA's duties, as the introductory sentence to the accountant's duties passage states, "I have alluded at different points in the charge to the duties of the parties". TR 11,703. The closing sentence of this section also instructs the jury to apply the duties charge in connection with the elements section. 2. Value of the Assets AA argues that it was error not to instruct the jury that high markups are not illegal, contending that "there can be no such thing as an `overcharge'". AA's Brief at 419. AA also claims that it was a non sequitur to instruct the jury as to the measure 1367 of damages that: "You should fix the fair value of these interests at the time plaintiffs purchased these interests if the information that was misrepresented or not disclosed were known." TR 11,712. This claimed error concerns only the overcharge issue. The first contention is frivolous. FOF's most favored nation status was a limitation on the prices KRC and TCC could charge for natural resource interests. Violation of the most favored nation agreement by charging prices that are too high is illegal. We adopted the "out-of-pocket" measure of damages, "the usual compensatory method of calculating damages in securities fraud cases", in our Memorandum Decision of June 8, 1981. As the nature of the overcharge claim involves the significance of allegedly undisclosed material information at the time of FOF's purchase, the measure of damages is as stated in the charge. There are various factors which might affect the value of a speculative asset without a readily available market value. See Affiliated Ute Citizens v. United States, 406 U.S. 128, 155, 92 S. Ct. 1456, 1473, 31 L. Ed. 2d 741 (1972). In light of the extensive discussion of this issue by counsel, it was not appropriate to marshal the possible alternatives that might affect the value of natural resource assets. We do not believe that the instruction endorsed or gave heightened importance to some factor at the expense of others. To avoid any prejudice to FOF resulting from a juror's broad, albeit unwarranted, understanding of our charge to disregard King's cost in determining AA's liability, a curative instruction was required. 3. Duties of the King Group AA contends that the jury instructions "failed to give adequate guidance for determining whether King and the King Group might have had any special duties", AA Brief at 416, and that breach of the duties enumerated in the charge does not amount to a securities law violation. Id. at 444. The instructions expressly confine consideration of any special duties to the issue of King's primary fraud as an element of the aiding and abetting claim. The Supreme Court has upheld the application of section 10(b) to cases of non-disclosure, "[b]ut such liability is premised upon a duty to disclose arising from a relationship of trust and confidence between parties to a transaction". Chiarella v. United States, 445 U.S. 222, 230, 100 S. Ct. 1108, 1115, 63 L. Ed. 2d 348 (1980) (emphasis added). The charge adequately instructs the jury that by "agreement or understanding or by a course of conduct" the King group may have entered into a special relationship with FOF and FOF may have placed special "trust and reliance" on King. TR 11,700. AA also claims error in our failure to charge the substance of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 et seq. (1976) ("IAA"). To establish primary fraud, however, it is not necessary that KRC or TCC be found to have been investment advisors within the meaning of the IAA. King had near total discretion to invest in natural resource interests for FOF. Such a relationship of trust and reliance imposes a duty of fair dealing on the advisor or manager of a discretionary investment account. Non-disclosure of material information despite a duty to disclose which directly affects the purchase or sale of securities between the parties is actionable whether or not the formal requisites of the IAA are met, because each element of a securities claim is established. The charge is so limited and it is valid. 4. Due Diligence AA does not challenge the accuracy of the court's charge concerning unjustifiable reliance, but contends that the jury "should have been instructed to consider the fact that these plaintiffs were highly sophisticated businessmen", AA Brief at 427. AA would have us include in the charge the often flowery language of Hirsch v. DuPont, 553 F.2d 750, 763 (2d Cir. 1977) and 2 Kent, Commentaries 485, quoted in Edwards & Hanly v. Wells Fargo Securities 1368 Clearance Corp., 602 F.2d at 489. It is asserted by AA that this language is necessary to prevent the jury from punishing AA for the directors' "careless indifference to facts readily available". AA Brief at 427. In this circuit, "plaintiff's burden is simply to negate recklessness when the defendant puts that in issue, not to establish due care". Mallis v. Bankers Trust Co., 615 F.2d 68, 79 (2d Cir. 1980). The Mallis court essentially adopted the standard of a plaintiff's conduct as thoroughly analyzed by Judge Wisdom in Dupuy v. Dupuy, 551 F.2d 1005, 1013-20 (5th Cir.), cert. denied, 434 U.S. 911, 98 S. Ct. 312, 54 L. Ed. 2d 197 (1977). Mallis v. Bankers Trust Co., 615 F.2d at 78-79 & n.10. Judge Wisdom concluded: Both tort law and federal securities policy support imposing on the plaintiff only a standard of care not exceeding that imposed on the defendant. Although the "scienter" requirement may still be unsettled, the Supreme Court has imposed on defendants a standard not stricter than recklessness. In this case, then, the question should not be whether [plaintiff] acted unreasonably by failing to investigate the condition of Lori Corporation. Instead, the Court should ask whether plaintiff intentionally refused to investigate in disregard of a risk known to him or so obvious that he must be taken to have been aware of it, and so great as to make it highly probable that harm would follow. W. Prosser, § 34 at 185 (1971). Id., see also Shores v. Sklar, 647 F.2d 462, 470 n.6 (5th Cir. 1981) (en banc), petition for cert. filed, 50 U.S.L.W. 3377 (U.S. November 2, 1981) (No. 81-839). It is consistent with this test to charge also that it must have been possible for plaintiff to discover the allegedly withheld information before reliance is considered unjustifiable. Rochez Bros., Inc. v. Rhoades, 491 F.2d 402, 409 (3d Cir. 1973). The charge covered all this ground. Thus, the jury had before it the very question that AA seeks to have answered: whether the information which AA did not reveal to FOF was readily available to FOF. To dictate to the jury that the FOF directors were sophisticated businessmen gives sanction to an argument of counsel. The court need not include in the charge additional editorial matter which might intrude upon the jury's province as factfinders and judges of the credibility of witnesses. 5. Determining Common Law AA objects to our instructions concerning common law damages. AA did not propose any instructions concerning damages. In our day long discussion of the first draft charge, however, AA raised the issue of breach of contract damages. TR 11,053-55. The thrust of AA's concern was the foreseeability of damages to FOF for breach of contract. The sufficiency of the general language of the charge on common law damages was never in issue. Nor was any such issue raised following the charge and prior to the commencement of jury deliberations. Accordingly, AA's objection is waived. Fed.R.Civ.P. 51. Compagnie Nationale Air France v. Port of N. Y. Authority, 427 F.2d 951, 955 n.2 (2d Cir. 1970). See Hudson v. Smith, 618 F.2d 642, 646 (10th Cir. 1980). Even were we to reach the merits of AA's objection, we find the charge adequate and accurate. The charge cautions that damages are recoverable only insofar as they are "the natural and probable consequences of the acts that give rise to liability [and] justly and fairly compensate[] for the injuries suffered, [but that any award should not] punish the defendants for any fault or wrongdoing [or] enrich the plaintiffs". TR 11,711-12. See Federal Pattern Jury Instructions §§ 85.08, .10 (3d ed. 1977). In the specific context of common law contract and fraud damages, the instructions restate the principle of foreseeability. TR 11,713-14. The parties' contentions with respect to common law damages were stated, without objection, earlier in the charge. TR 11,673-80. See generally Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 926 (2d Cir. 1977). 1369 6. Burden of Proof AA challenges the application of the preponderance of the evidence standard rather than the clear and convincing evidence standard in relation to section 10(b) and Rule 10b-5. Plaintiffs traditionally bear a greater burden of proof in civil fraud cases than in ordinary civil damage actions. Huddleston v. Herman & MacLean, 640 F.2d at 545-46, cert. granted, ___ U.S. ___, 102 S. Ct. 1766, 72 L. Ed. 2d 173; Addington v. Texas, 441 U.S. 418, 423, 99 S. Ct. 1804, 1807, 60 L. Ed. 2d 323 (1979) (dicta); Woodby v. INS, 385 U.S. 276, 285 & n.18, 87 S. Ct. 483, 487 & n.18, 17 L. Ed. 2d 362 (1966) (dicta). Indeed, cases have expressly required "clear and convincing proof" of common law fraud claims under New York law, Mallis v. Bankers Trust Co., 615 F.2d 68, 79 (2d Cir. 1980); Ajax Hardware Mfg. Corp. v. Industrial Plants Corp., 569 F.2d 181, 186 (2d Cir. 1977), and under Illinois law, Merit Ins. Co. v. Colao, 603 F.2d 654, 658 (7th Cir. 1979). However, this principle does not necessarily apply to securities fraud actions. The Supreme Court upheld the application of a preponderance standard in an SEC disciplinary proceeding for fraud under the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Steadman v. SEC, 450 U.S. 91, 98-99, 101 S. Ct. 999, 1006, 67 L. Ed. 2d 69 (1981). The holding was not based upon a consideration of the seriousness of the sanctions or the indirect nature of proof, which factors justify a higher standard in common law fraud actions, but upon the Administrative Procedure Act. Id. The Steadman Court thus did not decide upon a single standard applicable to all securities fraud actions. However, in at least three recent civil securities fraud cases, courts have applied a preponderance standard. Franklin Life Ins. Co. v. Commonwealth Edison Co., 451 F. Supp. 602, 607 (S.D.Ill.1978), aff'd, 598 F.2d 1109 (7th Cir.) (per curiam), cert. denied, 444 U.S. 900, 100 S. Ct. 210, 62 L. Ed. 2d 136 (1979); Mallis v. Bankers Trust Co., 615 F.2d 68, 79 (2d Cir. 1980) (dicta); Scarfarotti v. Bache & Co., Inc., 438 F. Supp. 199, 201 (S.D.N.Y.1977).[27] Nonetheless, the Fifth Circuit held, even after Steadman, that the "clear and convincing" standard applied to 10b-5 suits. Huddleston v. Herman & MacLean, 640 F.2d at 546, cert. granted, ___ U.S. ___, 102 S. Ct. 1766, 72 L. Ed. 2d 173. Another decision also recognized the "strong argument" for applying a clear and convincing standard of proof in 10b-5 actions. Kass v. Hornblower & Weeks-Hemphill Noyes, [1974-75 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 94, 721 at 96,383. Although the issue is not free from doubt, we are guided by Mallis and Steadman to apply the preponderance standard. 7. Payments to Witnesses AA contends that the instructions respecting the credibility of witnesses were inadequate for failure to highlight allegedly improper payments to witnesses Dickieson and Rallo. As a substantive matter, we are not convinced that the mere fact of payments, even seemingly large payments, warrants any explicit reference to 18 U.S.C. § 201.[28] Moreover, there is no evidence 1370 suggesting an intent to influence the witnesses testimony. See United States v. Isaacs, 347 F. Supp. 763, 767 (N.D.Ill.1972). However, it is permissible, indeed desirable, to bring any such payments to the attention of the jury and for counsel to comment upon the possible effect of large payments upon a witness' credibility. See United States v. Barrett, 505 F.2d 1091, 1101 (7th Cir. 1974). AA's counsel did make such arguments to the jury concerning Dickieson and Rallo. E.g., TR 1137-38 (summation re: Dickieson); TR 1138-39 (summation re: Rallo). The jury was instructed "to carefully scrutinize ... the circumstances under which each witness has testified and every matter in evidence which tends to show whether a witness is worthy of belief", TR 11,667, including "any relationship any witness may bear to any side of the case ... [and] the favoritism or prejudice of a witness", TR 11,668. Thus, the issue of witness payments was fully put before the jury and the charge concerning credibility permitted and encouraged the jury to use any such factors in evaluating a given witness' testimony. 8. Identity of Plaintiff AA raises two related objections concerning the identity of the plaintiff: (1) NRC was the purchaser of the natural resource interests and not FOF, and (2) FOF therefore violated the rule against barratry, champerty and maintenance. It is not disputed that NRC was the named purchaser of most of the natural resource interests.[29] It is also undisputed that NRC was a shell corporation through which NRFA monies freely flowed from FOF for the purchases in question. FOF, and not NRC, established and maintained the ongoing relationship with John King. FOF, and not NRC, reviewed whatever information was provided by King regarding the oil, gas or mineral interests. Insofar as AA contends that these purchases were a joint venture and cites the means of latent investor control available to the partner claiming fraud as avoiding the securities laws, it can only refer to FOF. Although NRC was named in Nominee Agreements, only FOF allegedly had the means available to value or exercise discretion as to various interests. In our Memorandum Decision of December 15, 1981, we noted several other facets of the 1371 NRC-FOF relationship that compel us to treat them as the same for purposes of this case "if the context permits": NRC's assignment of rights to plaintiffs ... and NRC's ratification of the present action under Rule 17(a) give NRC a stake in the outcome of this suit. We also note the substantial, if not complete, overlap between plaintiffs' shareholders who will be entitled to share in any recovery, and the shareholders who benefit from any recovery by NRC.... [Moreover], NRC's interest did not extend to the daily management of the mutual fund and, thus, NRC has no claim arising out of the revaluation. The foregoing undercuts AA's claim that the agreement between NRC (now a subsidiary of Global) and FOF was champertous. As NRC and FOF both had legitimate, disputed claims against AA arising out of substantially the same events, the settlement of their differences by an agreement to proceed through FOF is not champertous. See Poloron Products, Inv. v. Lybrand Ross Bros. & Montgomery, 534 F.2d 1012, 1015-16 (2d Cir. 1976); Coopers & Lybrand v. Levitt, 52 App.Div.2d 493, 497-98, 384 N.Y.S.2d 804, 807 (1st Dept. 1976). See also Del Re v. Prudential Lines, Inc., 669 F.2d 93, 96 (2d Cir. 1982) (Rule 17(a) ratification does not create new substantive rights but avoids forfeiture if it is unclear which one of two or more parties has a cause of action.). The circumstances of this case do not give rise to a factual issue regarding FOF's intent or purpose to bring suit upon the assigned claims where it previously had no right of action. 9. Special Verdict Form AA contends that the "Special Verdict Form" failed to comply with Fed.R.Civ.P. 49(a) in that it did not ask the jury to enter "a special written finding upon each issue of fact" and failed to comply with Rule 49(b) because it did not cover any issues of fact. However, the "Special Verdict Form" was never intended to satisfy Rule 49(a) or (b). Rule 49 is purely permissive; we are not required to submit to the jury forms requiring answers to any issues of fact. Turchio v. D/S A/S Den Norske Africa, 509 F.2d 101, 104 (2d Cir. 1974). The jury was instructed that "a verdict sheet" would be given to them, TR 11,749, "to assist ... in keeping the claims straight." TR 11,784. The jury was further instructed that: [Y]ou must answer questions concerning both liability and damages for each of plaintiffs' four different theories of liability, that is, primary violation of the securities laws, aiding and abetting violation of the securities laws by others, common law fraud, and breach of contract. You are asked to consider each of these theories with respect to plaintiffs' two claims, the overcharge claims and the revaluation claims. The "Special Verdict Form" was merely a checklist to record a general verdict on each legal claim. See Miller v. Premier Corp., 608 F.2d 973, 982-83 & n.10 (4th Cir. 1979) (District Court utilized the "perfectly serviceable practice" of submitting various discrete general verdict choices to the jury.) Together with the copies of the jury instructions provided to the jurors upon commencing their deliberations, the special verdict form ensured that all the issues would be addressed by the jury. In certain circumstances, of course, Rule 49 submissions may be helpful to the jury, the judge, and a reviewing court. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 279 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S. Ct. 1061, 62 L. Ed. 2d 783 (1980). AA suggested that we employ a general verdict form with special interrogatories pursuant to Rule 49(b). However, AA's proposal contained many biased and unhelpful questions. We could not give such interrogatories to the jury. Cutlass Productions, Inc. v. Bregman, 682 F.2d 323 at 327 (2d Cir. 1982). Even assuming that interrogatories accurately reflecting the evidence and the factual issues in the case could be drafted, we do not believe that their use was necessary. The factual issues 1372 were not highly technical nor overwhelmingly complex, nor was the case made difficult by numerous affirmative defenses or counterclaims. Thus, the better practice in this case was to provide a form for recording general verdicts on each separate legal claim in issue. Evidentiary Rulings 1. Main Hurdman Report AA contends that admission in evidence of the written report of FOF's expert witnesses concerning AA's compliance with GAAS was prejudicial error.[30] Under Fed.R.Evid. 702, the admissibility of expert testimony requires: (1) that specialized knowledge be of assistance to the trier of fact in understanding the evidence or determining factual issues; and (2) that a witness qualify as an expert by virtue of his or her "knowledge, skill, experience, training or education". Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 505 F. Supp. 1313, 1334 (E.D.Pa.1981). If these criteria are met, such an expert may testify as to an opinion, even concerning an "ultimate issue" of fact. Fed.R.Evid. 702, 704. Mere qualification as an expert is not a license to invade the jury's function by telling the jury what result to reach, see Marx & Co. v. Diners Club, Inc., 550 F.2d 505, 510 (2d Cir.), cert. denied, 434 U.S. 861, 98 S. Ct. 188, 54 L. Ed. 2d 134 (1977); Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 505 F.Supp. at 1331-32; nor is it appropriate for an expert to supplant the judge's function to instruct the jury on the law. Marx & Co., supra, 550 F.2d at 509-510. It is appropriate for experts to testify about the ordinary practices of a profession or trade "to enable the jury to evaluate the conduct of the parties against the standards of ordinary practice in the industry". Id. at 509 (citing VII Wigmore on Evidence § 1949, at 66 (3d ed. 1940)). A thorough review of the Main Hurdman report leaves us with no doubt about its helpfulness and little concern about its objectivity. At issue was AA's conduct in failing to discover or, having discovered, failing to disclose[31] material details of the FOF-KRC relationship. GAAS were relevant to but not determinative of AA's duties of inquiry and disclosure. The broadly stated rules were explained in the Main Hurdman report. The qualifications of FOF's experts as knowledgeable, experienced senior accounting partners to testify concerning industry-wide procedural guidelines are not seriously challenged. Of course, it does not undermine the qualification of FOF's experts if AA's expert is more qualified (as AA contends). Nor does it detract from the qualifications of FOF's experts that they were inexperienced in oil and gas matters; those experts sought to give content to general prescriptions applicable to all accounting problems. To that end, the subdivisions of the report defined each standard with precision by reference to governing professional bodies, scholarly commentary and interpretive rulings. A representative example of the expert's care in defining GAAS is their treatment of the accountant's duties in reviewing purportedly arm's length transactions. Px-667, pp. 110-120. Each segment of the report proceeds to apply these definitions to AA's conduct. We find that the report is balanced in its treatment of the professional guidelines. E.g., id. at pp. 13 (no violation of the co-ownership guidelines), 35 (does not 1373 presume crucial issues of knowledge or intent), 66 (concedes that the language inserted in the IOS Growth financials may be considered a qualification). We especially note the assumption that AA was not engaged in fraud (pp. 5-28) and the comment that AA had reason to be wary of IOS as well as KRC (p. 83). On the whole, the report thoroughly and fairly expresses an expert opinion helpful to the trier of fact. 2. Directors' Testimony Testimony was elicited from various members of FOF's Board of Directors that they would have liked to have known of the differential between King's costs and receipts on sales of natural resource interests to FOF in general and regarding specific purchases. AA objected to the admissibility of this evidence, relying principally on the authority of Bridgen v. Scott, 456 F. Supp. 1048, 1063-64 (S.D.Tx.1978). Bridgen granted summary judgment after trial for defendant (based on a motion filed before trial). Id. at 1066. In reviewing the evidence adduced at trial to determine whether material factual issues could have been raised by plaintiffs before trial to defeat the summary judgment motion, the court discredited plaintiffs "almost identical, vague and self-serving testimony concerning their contentions relating to alleged misrepresentations and concealments ... and their alleged reliance thereon". Id. at 1063. In light of the testimony of plaintiffs' father, "a mature, thoroughly experienced investor, with considerable business experience in many varied activities" who acted for plaintiffs "at all material times", id. at 1062, plaintiffs' testimony was not probative. Id. at 1063. Moreover, the court found that plaintiffs' testimony was based upon a "gross and misleading over-simplification" of the facts. Id. at 1063-64. The court also referred to the principle that "[v]ague, self-serving speculative testimony concerning what a party would have done under different circumstances is generally not admissible". Id. at 1063. While we agree that speculative and self-serving testimony is generally inadmissible, we do not find the directors' testimony inadmissible or unduly prejudicial. The directors were not parties to this suit and did not stand to gain from the allegedly "self-serving" testimony. Whatever moral vindication might be derived by the directors from a verdict for FOF is substantially dissipated by the passage of time. Assuming that the directors have some residual interest in putting their involvement with FOF in the best possible light, we find that the testimony in question is relevant to many of the issues. AA was obligated to determine the basis on which the King-FOF dealings were being conducted and the directors were entitled to know information discovered in the course of AA's audit which directly contradicted the assumptions upon which the directors were conducting transactions with King. That the directors would have liked to have known the information discovered by AA is not speculative. Under Fed.R.Evid. 701, the trial court has substantial leeway to permit lay witnesses to testify in terms of opinions, provided that the opinion is "rationally based on the perception of the witness" and "helpful to a clear understanding of his testimony or the determination of a fact in issue". The present case differs from Bridgen in the important respect that the hypothetical questions accurately reflected the underlying facts. To the extent that the facts upon which the questions were based, albeit accurate, reflected FOF's position, AA's cross-examination of the directors would (and did) point up the weakness. The Advisory Committee's Note on Rule 701 contemplates such a process to clarify and challenge lay opinion testimony. In sum, we believe that Bridgen is distinguishable, that the directors' relevant and helpful testimony was admissible, and that such testimony was not unduly prejudicial. 3. Turnkey Drilling AA contends that false testimony by FOF's expert and misrepresentations by FOF's counsel resulted in the improper inclusion of evidence concerning six turnkey drilling arrangements in FOF's damage 1374 charts. A "turnkey" drilling arrangement is a fixed price contract whereby the vendor assumes the obligation to drill a well. If the drilling costs exceed the price charged, the vendor's profit is eroded or eliminated. It is not disputed that FOF abandoned any claims for overcharges by the King group for drilling wells and sought damages only for sales of natural resource interests. We fail to see any "falsehood" or "misrepresentation" concerning FOF's claims. FOF's expert testified that all items on the damage charts were listed as reflected in King's financial records and AA's audit review. TR 10,837-39, 10,843-44. In order for AA to resolve the crucial issues discussed above concerning the relationship between KRC and FOF, it must have considered (and obviously did consider) KRC's characterization of the items. Thus, the inclusion of such matters on the charts is not irrelevant or in bad faith. However, AA's ultimate conclusion has some merit. FOF cannot include these turnkey drilling arrangements in the computation of damages as it wholly abandoned such claims. In this connection, it does not matter how the transaction was labeled for accounting purposes. The overcharge damages attributable to the turnkey drilling arrangements included in Px-743 are: Avg. Damages or Well Cost to TCC Pct. Mark-Up Price of FOF Excess Mark-Up New Underwood $ 47,691.00 41.12% (1970) $ 77,400 $ 10,098.46 Bricker Ranch 135,315.22 50.64% (1969) 200,000 ( 3,838.84) North Flank 99,125.00 41.12% (1970) 238,620 98,734.80 Leonville 280,375.44 50.64% (1969) 402,375 ( 19,982.56) Brazos 279,630.00 50.64% (1969) 396,330 ( 24,904.63) ____________ Total Deductible from Overcharge Verdict ........................... $108,833.26 As indicated above, the verdict did not include any damage award for overcharges on the Bricker Ranch, Leonville or Brazos interests. The award may only be reduced by amounts found by the jury to have been excessive. There is also one item on Px-740 which was improperly included within the calculation of overcharge damages for the same reason. The Port Gentil permit cost KRC $1,644,110. Addition of the average mark-up for 1969 (the method of damage calculation adopted by the jury) brings the allowable sales price to FOF to $2,133,233. Subtracting this from the actual sales price to FOF gives the damage award attributable to this transaction: $366,767. Thus, a total of $475,600 should be subtracted from the overcharge award. 4. Other Evidentiary Rulings The following issues raised by AA are adequately discussed on the trial record: Point XI: Exclusion of Fisher's TR 10,007-18 Testimony Point XIII: Sending Main TR 11,863-65 Hurdman Report to the Jury Point XIV: Evidence of "Good TR 10,560-62; Faith" 10,572-75 Point XIX: Exhibits TR 11,908-44. Regarding Revaluation AA's objections are without merit. Damages We have consolidated in this section AA's various objections to the damage award rendered by the jury. 1. Measure and Proof of Damages for Overcharges. In our Memorandum Decision dated June 8, 1981, we adopted the out-of-pocket measure of damages as appropriate to the claimed fraudulent overcharges. The theory of FOF's overcharge claim was that the information known to AA, or that AA recklessly failed to discover, showed that KRC and TCC were not adhering to the agreement of the parties in one or more ways. See pp. 1342-1343, 1354-1355 supra. As a result, FOF allegedly paid 1375 more for the natural resource interests than it was obligated to pay. The difference between what FOF paid and what FOF should have paid had the information been revealed to FOF by AA is the proper measure of damages. Our charge to the jury was tailored to the damages suffered as a result of AA's conduct: If you find that plaintiffs proved a violation of Section 10(b) or Rule 10b-5 or Section 17(a) with respect to the overcharge claim, plaintiffs may recover the difference between the price paid for the natural resource interests and the price that they should have paid; that is, you should fix the fair value of these interests at the time plaintiffs purchased these interests if the information that was misrepresented or not disclosed were known. Although I previously instructed you not to rely in any way on an alleged agreement to sell at King's cost in assessing liability, King's cost that is, the price paid by King for the natural resource interests may be considered as one means of assessing the value of the interests at the time of purchase. Of course, you may also consider any other matters in evidence which may bear on the value at that time. TR 11,712. The jury apparently adopted a measure of damages proposed by FOF which calculated the average percentage markup charged by KRC and TCC to other entities and applied that to KRC and TCC's "cost of sales" to FOF. The final damage figure was a reasonable approximation of the difference between KRC and TCC's charges to FOF and the charges that would have been made to FOF had the agreement between the parties insuring price protection according to the prices paid by other knowledgeable industry purchasers been followed. See Perma Research and Development v. Singer Co., 542 F.2d 111, 116 (2d Cir.), cert. denied, 429 U.S. 987, 97 S. Ct. 507, 50 L. Ed. 2d 598 (1967). The jury reasonably could find that the prices paid by other knowledgeable industry purchasers constituted fair value and that FOF should have been charged prices proportionate to these other sales. Moreover, the evidence showed other factors which might indicate that prices charged to FOF should be lower than the proportionate markup of other interests for example, the interests sold to FOF were purchased by KRC and TCC during the short time of FOF/KRC dealings specifically for resale to FOF and were resold without significant intervening time for discovery or further exploration. It is not the case that King's markup on sales to FOF should have been higher than to other industry purchasers because FOF was searching for properties with the potential for extraordinary returns, or so-called "elephants." TR 9337-38. One does not generally pay more for a risky venture than a safe one. The most favored nation provision was King's agreement to pass on portions of his interests to FOF at prices not greater than knowledgeable industry purchasers would pay and King himself was among the most knowledgeable industry purchasers. Therefore, the deal he struck arguably made his bargains, FOF's bargains. The jury's approach was a reasonable calculation of FOF's damages.[32] 1376 AA also contends that damages cannot be assessed for any of FOF's purchases as AA did not know of each sale until long after they were completed and did not know the relevant cost figures for the King group that FOF claims put AA on notice that something was awry until AA commenced its various audits. Whether one considers this issue as part of the "in connection with", causation or damages elements of securities violations, it is true that conduct occurring or commencing after the transaction is completed is not actionable. E.g., Morgan v. Prudential Funds, Inc., 446 F. Supp. 628, 633 (S.D.N.Y.1978). FOF must demonstrate that AA's conduct was in connection with the purchase of natural resource interests from KRC and TCC or, in other words, that AA's conduct proximately caused FOF's overcharge damages. The evidence shows that AA first became aware of the relationship between FOF and the King group in its year end 1968 audit of FOF. At that time, AA had to resolve any questions concerning principal agreements between FOF and KRC. At least as of March 24, 1969 and, plausibly, prior to February 5, 1969, AA knew or recklessly failed to discover King's violations of the agreement. Thus, any transactions consummated prior to these dates cannot have the requisite causal link with AA's conduct. FOF concedes that three interests were selected and paid for before March 1969. Plaintiff's Brief in Opposition, pp. 95-96 n.61. The amount of the verdict attributable to these three interests, $2,926,096, must be deducted from the damage award. However, AA's actual knowledge of the overcharges at least as of March 24, 1969 is causally related to all subsequent purchases.[33] AA's failure to clarify the essential terms of the ongoing FOF/KRC relationship, failure to disclose internal accounting deficiencies or failure to disclose the information it possessed reasonably and foreseeably induced FOF to continue to make purchases on the erroneous assumption that a common interpretation of the agreement between the King group and FOF (protective of FOF) governed the securities purchases. AA did nothing after March 1969 to break the direct causal link between its shortcomings and FOF's damages. However, FOF's summary failed to take into account certain significant administrative or overhead expenses for 1969 and 1970 reflected on earlier charts. TR 7610. Over the 1968-70 period, such expenses amounted to $27,104,195 and King's direct cost of sales accounted for in FOF's charts total almost $104 million. King's (legitimate) accounting methods did not attribute overhead costs to specific natural resource interests unless there was a basis for direct attribution. Unless those indirect expenses are added to King's cost of sales, however, FOF will recover as damages from AA an amount in excess of what it could recover from the King group itself. No reasonable juror could expect King to sell interests to knowledgeable industry customers at prices which merely reflect direct costs of acquisition of assets (e.g., purchase price, financing costs, testing, etc.) and would not sustain his basic operations (salaries, computers, etc.). There is no evidence that King's overhead costs were overstated or improper in any way. The damage figures, therefore, should be reduced for KRC's administrative expenses in proportion to KRC's yearly cost of sales to FOF and to other 1377 entities.[34] According to Px-737, the ratio of KRC's costs of sales to FOF for 1969 and costs of sales to other entities for 1969 is 13.2:48.8 or .270; for 1970, the ratio is 5.1:9.2 or .554. We thus apply these figures to the total yearly expenses unaccounted for in Px-748 $15.1-million for 1969; and $10 million for 1970. For the year 1969, total damages for King's overcharges must be reduced by $4.08 million and overcharge damages must be reduced by $5.54 million for 1970. Finally, AA contends that the values of FOF's purchases were at least as great as the purchase price, so that damages cannot be awarded. The jury's determination based upon the weight of the evidence and the credibility of the witnesses is supported on the record. We cannot merely disregard the jury's verdict if it is supported by ample probative evidence. AA's contention that the Arctic interests were properly valued and cannot be considered in awarding overcharge damages is not solely based upon a re-weighing of the evidence, but also rests upon an interpretation of the jury verdict regarding the June 30, 1969 revaluation. AA notes that the jury verdict did not award damages for the June 1969 revaluation, and contends that the jury must have accepted the $2.00 per net acre value. A $2.00 per net acre value as of June 30, 1969 is inconsistent with any overcharge damages concerning those interests, it is argued, because FOF's cost for the Arctic interests was approximately $.96 per net acre at about the same time. The jury verdict is not necessarily inconsistent in this respect.[35] The jury reasonably could conclude that there were no securities or common law violations by AA in connection with the June 30, 1969 revaluation for reasons other than the fairness of the price charged to FOF. The jury's finding that a $2.00 per acre valuation was appropriate as of December 31, 1969 and its award of damage for the fraudulent revaluation based upon that figure is not tantamount to a finding of value as of June 30, 1969. Thus, the jury consistently could find AA liable for King's overcharges in the sale of the Arctic interests to FOF and not award damages for the June 30, 1969 revaluation. 2. Revaluation Damages The measure of damages owing to the December 1969 Arctic revaluation presented by FOF and accepted by the jury multiplies the per share effect of the revaluation (held constant despite the decreasing overall value of FOF shares) by the daily number of net redemptions by shareholders. As AA correctly points out, this approach assumes that the entire amount of unrealized appreciation recorded in the revaluation was erroneous. AA argues that the per share value arrived at through the revaluation was accurate, even assuming that the means were improper and that FOF therefore suffered no damage. There was substantial evidence from which the jury could conclude that the actual value of the Arctic interests was less than $8.01 per share: (1) the logical inference from the fact that King concocted a fraudulent deal; (2) the testimony that Standard Oil Company (Indiana) declined to participate in King's proposed sale in part because of the price; (3) the testimony and exhibits revealing the uncertainties of short-term development in the Arctic and specifically the difficulty developing King's acreage (TR 6172-78; Dx-5-15); (4) the much lower amount of the June 1969 revaluation and the Sproule appraisal in connection with the June revaluation; (5) the 1970 sale of a portion of King's interest to Sun Oil at a substantially lower price; and (6) 1378 Texaco's January 1969 purchase of Arctic interests for $7.07 per acre. Although some of the evidence cited by AA in support of its position is hearsay not admissible to prove a value at the time, there is evidence in the record that the $8.01 per acre was accurate or low. TR 866; TR 9938; Dx-A-58; Dx-D-5. Additional proof concerning the speculative nature of the Arctic investments and their possible future returns is equivocal as to the realizable value of the investments in December 1969. E.g., TR 7057-62. The jury's finding that the revaluation was improper and that the $8.01 per acre valuation was not currently realizable is thus supported by the evidence. The value figure adopted by the jury is within the range of values permitted by the evidence although it is close to the bottom of the range. Contrary to AA's contention, FOF did not leave the jury without any basis for computation of actual damages. FOF took two alternative positions, one that the June 1969 revaluation was accurate, but that the December 1969 revaluation was wholly improper and one that the June 1969 revaluation was also improper. The jury adopted the former approach. AA failed to offer probative alternatives (aside from the seriously belated effort to introduce William Fisher's expert testimony on this point). Nonetheless, it is FOF's burden in the first instance to prove compensable damage. As we find the jury's verdict on this point substantiated by the proof, and not contrary to either the quantity or persuasive quality of the remainder of the evidence, we deny AA's motions for judgment n. o. v. and for a new trial. We also find to be insubstantial AA's contention that the failure of the FOF Board of Directors to change the revaluation after the May 2-3, 1970 meetings obviates recovery for the revaluations after that date. AA maintains that the statements in the year end 1969 financials that the auditor's report was "subject to" the effect of the revaluation and that AA had reviewed the transaction to determine whether it was in accordance with FOF's guidelines necessarily alerted the Board to the possible problems with the revaluation. Clearly that is not the case. Although the draft opinion might have disabused some of the directors of the notion that AA had, in effect, appraised the interests, the auditor's opinion failed to inform the directors that AA had good reasons for questioning the substance and effect of the revaluation arising from its inquiry into the method of the revaluation and its consistency with FOF's guidelines. Without the information known to AA, the directors would not have reason to question the revaluation and could not independently reconsider the substance of the revaluation. Moreover, the directors, exercising due diligence, promptly sought to investigate the transactions underlying the revaluation when doubts arose by retaining Rinfret, Sproule and Donovan, Leisure, although these reports were received after the redemptions were made. Dx-A-58. Judgment Before entering judgment, we reduced the overcharge verdict by amounts obtained in settlement of the multiplicity of disputes between NRC and both TCC and KRC. Memorandum Decision of December 15, 1981, p. 13-14. Our object is to prevent the recovery of an amount greater than actual damages, by considering settlements which are the equivalent of recovery by FOF, or attributable to them, and which concern the same acts at issue herein. 1. NRC-TCC Settlement We held that the entire NRC-TCC settlement should be applied to the jury verdict as there was no basis in the record to allocate a discrete portion of the settlement to the issues at hand. At this time, FOF argues that the NRC-TCC settlement did not concern the subject matter of their overcharge claims and that a firm basis for allocation of the settlement proceeds exists in the present record to eliminate the deduction previously made. AA contends that the claims released by NRC included the overcharge claims and that further deductions are warranted. 1379 We cannot say that NRC's settlements with TCC and KRC are unrelated to the fraudulent overcharge claims in this case. FOF's chief argument that the verdict should not be reduced by the amounts of NRC's settlements is that NRC did not have any legal right to damages for the overcharge claims. The dispute between FOF and NRC is not a live controversy before us. As a result of the ratification of this suit by NRC pursuant to Rule 17(a), both FOF and NRC will gain as a result of the jury verdict. FOF is not entitled to an advisory determination of the effect of the spin-off of natural resource interests to NRC upon FOF's rights of action. It is also significant that the settlements cut off further development of the fraud claims asserted by NRC against TCC and KRC. Earlier pleadings in this case bear closer resemblance to the statements of claims preceding the settlement than does the second amended complaint upon which damages were based. We should not ignore the evolution of FOF's theory of the case from claims similar to NRC's to the present overcharge claim and we do not find that NRC's formal assertions in the TCC and KRC matters constrict the effect of the settlements to the specific claims thought to be "winners" at the time. The NRC-TCC settlement was effective as to all claims arising out of the relationship between the parties. Thus, we adhere to the rationale of our December 15, 1981 decision and find that the NRC settlements should be applied to reduce the verdict. We agree that the post-trial evidence conclusively establishes that the $2,950,000 cash received in the NRC-TCC settlement constitutes payment for NRC's 30% interest in the Green Mountain uranium property and is not consideration related to this case and the judgment may not be reduced by that amount. NRC received the cash as its allocable portion of the $10 million sales proceeds. Beatty Ex. C. As the judgment did previously subtract $2,950,000 from the overcharge verdict, such amount must be restored to the judgment. Our prior decision did not value the other aspect of the settlement due to insufficient evidence. Post-trial discovery authorized by the court has produced more evidence concerning the events surrounding the settlements. The receipt of a 3% overriding royalty interest ("ORRI") by NRC in settlement of all other claims logically includes the fraud claim in this case. Although Beatty Exhibit C-1 excepts the then-existing fraud claim (that TCC received payment for work that was not done) from the calculations of claims that NRC was giving up in the settlement, the fraud claim was not excepted from the release. Thus, the value of the 3% ORRI to NRC at the time of settlement should be deducted from the verdict.[36] The only evidence before us concerns the value of the 3% ORRI for the Black Warrior interests in Alabama and Mississippi. FOF produced some evidence that a value in the range of $100-250,000 was placed on the ORRI at the time of the settlement, Beatty Exhibits C, C-1, based upon substantially contemporaneous estimates of possible returns of 10 Billion Cubic Feet ("BCF") of natural gas at $1.30 per Thousand Cubic Feet ("MCF") totaling $390,000 without discount to present value. Reycraft Aff. Exhibit 12. Earlier estimates recognized a possible value of $750,000 over 8-10 years, based upon 25 BCF at $1.00 per MCF, or $400,000 present value in 4-5 years. Reycraft Aff. Exhibit 14. In an attempt to show that information available to NRC at the time of settlement supported a greater valuation, AA introduced a chart compiled by NRC at year end 1976, which lists 16 interests in the Black Warrior basis, of which 11 were subject to the ORRI. However, reserve figures are given only for nine of the interests, 5 of which are subject to an ORRI, totaling 197.1 MCF. The chart does not reveal production estimates for the 4 wells successfully drilled by NRC in Black Warrior in 1976. But AA does not offer 1380 any estimate of the Black Warrior net reserves contemporaneous with the settlement contrary to the 10 BCF estimate of NRC. Indeed, AA finds in the 1977 Gruy report an estimate of 12 BCF of net reserves attributable to NRC's interest in Black Warrior. AA has not offered any evidence that a price of $1.00 per MCF or $1.30 per MCF was an inadequate estimate at the time. We thus credit the 10 BCF estimate and use the $1.30 per MCF price, or an undiscounted value of $390,000. The $150,000 discounted value placed upon the ORRI by NRC appears reasonable for all purposes, including reduction of the verdict. 2. NRC-KRC Settlement Our December 15, 1981 decision did not reduce the verdict by the value of the NRC-KRC settlement as no evidence of FOF's benefit was produced. AA has conducted discovery and submitted evidence of the value of several elements of the NRC-KRC settlement entered into February 5, 1974 (the "primary settlement"). AA also contends that the consideration exchanged pursuant to an agreement between KRC, Global Arctic Islands, Ltd. ("GAIL") (the successor to NRC's Arctic interests), and Sunoco E & P, Ltd. ("Sunoco") (the "secondary agreement"), entered into on the same date and incorporated by reference in the primary settlement, should reduce the verdict. Paragraph 8 of the primary settlement changes KRC's net operating profits interest ("NOPI") on all non-producing oil and gas properties wherever located into a 5% ORRI, reduced further by a contractual formula, and changes KRC's NOPI on producing oil and gas properties wherever located into a working interest.[37] Neither aspect of the primary settlement affects the secondary agreement as to the NOPI on the Arctic interests, which is discussed infra. The only inclusive estimates by NRC of the value of the NOPI for U. S. and Arctic interests was $1,375,000. Most of the separate elements of this trade-off were valued individually. A valuation of the NOPI for producing and non-producing U. S. interests is in the range of $500,000 to $1,000,000. A separate assessment of the value of the exchange of the NOPI for the ORRI on non-producing interests placed its value in the range of $500,000-$800,000. FOF's present calculation of the value of the trade-off on non-Arctic, non-producing interests is about $352,000. No estimate was made for the value of the NOPI on producing Arctic interests. Consistent with these estimates, an overall valuation of $1,375,000 for the exchange of the NOPI on U. S. and non-Arctic interests pursuant to paragraph 8 of the primary settlement is fair and reasonable. The verdict shall be reduced by that amount. We turn next to the applicability and valuation of the secondary agreement. KRC, GAIL and Sunoco held undivided interests in the Arctic; both GAIL and Sunoco initially obtained their interests from KRC. These interests were concededly unworkable without resolution of the various claims pending against KRC in the bankruptcy court. The secondary agreement was designed "to settle certain controversies, claims, and lawsuits, and to adjust [the] rights and obligations [of KRC-GAIL-Sunoco] in respect of certain properties, agreements, options and other rights". Beatty Aff., Exhibit E. Both parties agree that the significant aspect of the secondary agreement to GAIL was termination of the NOPI asserted by KRC. FOF contends that the relinquishment of acreage and ORRIs by GAIL in exchange for the termination of KRC's claim to NOPIs was not related to the present overcharge claims.[38]1381 We hold that, as a matter of fact, the secondary agreement concerning the NOPI for the Arctic interests is not the equivalent of recovery by FOF for the overcharge claims at issue. The legality of the imposition of a NOPI under Canadian law was a matter of heated dispute between NRC and KRC. The exploitation of the Arctic interests was inhibited primarily by KRC's lack of cash to pay working obligations and title questions. NRC, which had been making required payments for KRC, refused to do so any longer, thus introducing a threat that interests might be forfeited. In order to begin to develop the interests, NRC settled the NOPI issue with KRC. KRC was provided with some working interests and ORRIs which were immediately transferred to Sunoco for cash and work credit, easing KRC's tight cash flow position. Sunoco also gave NRC a $7-million work credit. Sunoco took charge of the development program, replacing KRC. After the dust settled, KRC had operating cash and work credits, Sunoco had additional interests and management authority, and NRC eliminated the dispute concerning the legality of the NOPI. The way was cleared for development. The "Roche trade" upon which the secondary agreement was built did not compensate NRC for settlement of the fraudulent overcharge claims (or other related claims which subsequently matured into the overcharge claims). We reject AA's argument that the cancellation of the KRC de Mexico $1,000,000 note held by Global resulted in a net benefit to Global which should be deducted from the verdict. Simply put, there is no evidence connecting the note to the claims upon which FOF recovered herein. Savings owing to cessation of litigation also are not deductible. 3. Allocation of Proportionate Fault A separate matter relating to the judgment concerns the reduction of the verdict sought by AA for the proportionate fault of various joint tortfeasors who were not parties to this action. Our decision of December 15, 1981 explained that a reduction for the proportionate fault of others was inappropriate unless the alleged joint tortfeasors were "in some way brought into the original suit", although a separate action was available to decide such questions, and that the record did not permit "the necessary factual findings of relative fault" even if we could decide issues of proportionate fault concerning non-parties alleged to be joint tortfeasors. Neither point is startling or without precedent. The Fifth Circuit has reduced substantially the same issue as the former issue to six simple principles: (1) Where concurrent fault of two or more persons combine to produce injury, the parties at fault are joint tortfeasors and, as such, are liable to the injured plaintiff. (2) The Federal Rules of Civil Procedure have liberalized joinder and impleader rules ... to facilitate the presence of all interested parties in one action. All potential joint tortfeasors may be made third party defendants, pursuant to Rule 14(c). Application of the Rule in this manner is the only possible interpretation of it consistent with its purpose and intent. (3) Where there are two or more defendants (alleged joint tortfeasors), and the plaintiff settles with and grants a release as to one or more of them, reserving his rights against the remaining, the settling defendants are relieved of any further liability to the plaintiff. (4) When two or more parties have contributed by their fault to cause injury to another, the liability for such damage is to be allocated among the parties proportionately 1382 to the comparative degree of their fault. (5) A tortfeasor seeking to assert a reduction by the degree of fault of alleged joint tortfeasors must prove by a preponderance of the evidence that the settling defendant was, in fact, at fault. (6) A settling party's negligence is considered only when he has been made a party to the suit. In such a case, the judgment awarded to the claimant against the nonsettling defendant is credited with the dollar amount represented by the proportion of negligence, if any, attributed to the settling parties. Leger v. Drilling Well Control, Inc., 69 F.R.D. 358, 362-63 (W.D.La.1975) (footnotes omitted), aff'd, 592 F.2d 1246, 1248 (5th Cir. 1979) (adopting District Court's "scholarly approach"). We touched upon each of these principles, except for number one, in our prior decision. The first principle has been recognized by numerous decisions. E.g., Edmonds v. Compagnie Generale Transatlantique, 443 U.S. 256, 260 & n.8, 271 n.30, 99 S. Ct. 2753, 2756 & n.8, 2762 n.30, 61 L. Ed. 2d 521 (1979) (common law and admiralty); Slotkin v. Citizens Casualty Co., 614 F.2d 301, 317 (2d Cir. 1979) (New York law); Mattschei v. United States, 600 F.2d 205, 209 (9th Cir. 1979) (California law). Contrary to AA's contentions, each joint tortfeasor can bear individual liability for plaintiff's total damages, Liberty Mutual Ins. Co. v. Vanderbush Sheet Metal Co., 512 F. Supp. 1159, 1166 n.3 (E.D.Mich.1981); Migues v. Nicolet Industries, Inc., 493 F. Supp. 61, 64 (E.D.Tx.1980), at least until the liability of joint tortfeasors is established, see e.g., In re National Student Marketing Litigation, 517 F. Supp. 1345, 1347-48 (D.D.C. 1981), or payment is made, see generally, Heizer Corp. v. Ross, 601 F.2d 330 (7th Cir. 1979). Cases also support our alternative conclusion that evidence sufficient to make a determination of relative culpability is required before the issue can be submitted to the jury. Liberty Mutual Ins. Co. v. Vanderbush Sheet Metal Co., 512 F.Supp. at 1165-66 (In a separate suit against a subcontractor by an insurer which previously satisfied a judgment in favor of the subcontractor's employee against the general contractor wherein the general contractor was adjudged 90% liable, subcontractor's liability was an open question (not limited to a portion of 10%) as the subcontractor was not a party and did not have evidence about it introduced at prior trial.); Payne v. Gould, 503 F. Supp. 1060, 1061 (E.D.Tx.1980) (third-party claims for contribution not sent to jury due to lack of evidence). Thus, we adhere to our prior decision. Conclusion We grant AA's motion for judgment notwithstanding the verdict concerning the primary violation of section 17(a)(3) and aiding and abetting violations under sections 17(a)(1), 17(a)(2) and 17(a)(3) concerning the revaluation claims. We also grant judgment n. o. v. with respect to several particular items of damage included in the verdict. See pp. 1374, 1376, 1379-1380 supra. In all other respects, we deny AA's motion. We also deny the motion for a new trial. Our extensive review of the record and assessment of the impact of our many rulings does not convince us that the jury verdict was erroneous or a miscarriage of justice. SO ORDERED. NOTES [1] As there was no evidence that defendants obtained any money or property in the offer or sale of securities, we dismissed plaintiffs' claims that defendants were primary violators of section 17(a)(2), 15 U.S.C. § 77q(a)(2) (1976), before submitting the case to the jury. TR 11,364-66, 11,685-86. [1.5] On May 23, 1967, IOS, Ltd. entered into a settlement order with the SEC which required, inter alia, that IOS, Ltd. and FOF, reduce their presence in certain areas subject to the jurisdiction of the SEC and comply with securities statutes and SEC rules and regulations in other such areas. Px-22. By the same order, IOS, Ltd. and FOF agreed to cease "all sales of securities to United States citizens or nationals wherever located" with three minor exceptions. Id. [2] After all the transactions at issue herein occurred, IOS, Ltd. was taken over by Robert L. Vesco and his associates as part of a complex fraud not pertinent to this suit. See Fund of Funds, Ltd. v. Arthur Andersen & Co., 435 F. Supp. 84, 88 (S.D.N.Y.), aff'd in part, rev'd in part, 567 F.2d 225 (2d Cir. 1977). Both parties desired to avoid any problems, however remote, that might occur if the irrelevant conduct of Vesco subsequent to the transactions at issue was introduced into the case in a significant way. By agreement of the parties, therefore, every effort was made by counsel, witnesses and the court to avoid reference to Vesco. This effort was quite successful. [2.5] Note 3 to the Consolidated Financial Statements of FOF's 1969 Annual Report states that FOF Prop paid performance fees for the NRFA amounting to 10% of the "net realized and unrealized investment gains" to various management companies, all of whom are wholly-owned subsidiaries of IOS, Ltd. Dx B 2. Although the performance fees were purportedly paid pursuant to "investment advisory agreements," there is no evidence of an investment advisory agreement regarding the NRFA. Even assuming the existence of a formal agreement, there is ample evidence that no investment advisory services were performed by any IOS, Ltd. subsidiary for the NRFA. The King group dealt directly with Cowett in arranging sales of natural resource interests. Nonetheless, FOF did pay the 10% performance fee and it is an element of the damage award obtained by FOF. [3] There is evidence that the interests sold by the King group to FOF were purchased by KRC or TCC specifically for that purpose. PX 519. AA knew about this "special inventory" of natural resource interests. [4] AA argued that the April 19, 1968 letter fully and accurately expressed the terms of the FOF KRC relationship. E.g., TR 11,147, 11,180, 11,183, 11,194, 11,249. FOF argued that the November 11, 1970 letter ought to be given greater weight than the April 19 letter. E.g., TR 11,379, 11,382, 11,434. The jury, in weighing this evidence, reasonably could find, as did the court, that the April 11, 1969 letter was of very limited utility. The April 1969 letter primarily concerned the investment advisory relationship and was apparently written to create the impression of FOF's compliance with the 1968 SEC settlement order. The particulars of the April 1968 letter are contrary to all the evidence: (1) there is no proof that there ever was a Natural Resources Management Co., Ltd. ("NRMC"); (2) assuming NRMC formally existed, there is no evidence that it could or did actively screen NRC's investments; and (3) NRC never dealt with vendors other than King. As far as the pricing arrangements for King's sales to FOF, the April 1969 letter merely repeats the ambiguous provision that transactions were to be arm's length but at prices no less favorable than those offered by King to other non-affiliated purchasers. By contrast, the November 1970 letter deals primarily with the pricing arrangement, is corroborated by other evidence, and elaborates upon the sketchy terminology of the April 5, 1968 Acapulco minutes and the April 19, 1968 letter. [5] Q [FOF's counsel] What was your understanding of the basis on which King would sell to Fund of Funds if he bought a property in the morning and sold it to Fund of Funds in the afternoon, and there were no oil or gas strikes over lunch? A [Conwill, on cross-examination] My understanding was that if there was a significant difference in the price, that I would want management to inquire into the reason if we knew. Q Did you have a general expectation as to the price that King would charge Fund of Funds under such circumstances? A If I had been asked what my general understanding was under those circumstances, I would have expected it, barring some explanation which could be made to satisfy our management, that it would be essentially the same, subject to his retention of the net operating profits interest. Q In other words, for a property bought yesterday morning and sold to Fund of Funds yesterday afternoon, you would expect the same price to be charged to Fund of Funds that King paid for it, subject to the net operating profits interest of 12½ percent, is that correct? A Not in all instances, sir. I can imagine situations where it would not necessarily be true. Q But that's the general rule that you expected to be followed, didn't you? A Generally I would expect that to be the case. Q Do you recall testifying: "Now, as to property bought specifically for Fund of Funds, depending on how long he had to hold it or whether he if he bought it in the morning for X and nothing happened in the morning, and in the afternoon he sold it to us, I would expect to pay X for it less 12½ percent net operating profits interest, or the NOPI." And that's what you just said. A Yes, sir. Q You went on to say assuming there were no oil strikes over lunch. You agreed with that? A Yes, sir. Q Do you recall being asked what your understanding would have been if you extend the matter for a couple of weeks and there is still no oil strikes in between or new seismic or geological data? Would you still expect that if King purchased a property for X, that he would sell it to Fund of Funds for X subject to the 12½ percent net operating profits interest? A Generally I suppose that would be, if he had it only for a couple of weeks and there were no other developments, if you assume no other developments or no other knowledgeability on the part of the King organization that would tend to enhance its value. Q You would expect Fund of Funds to pay X if King had paid X, subject to the 12½ percent net operating profits interest; isn't that correct? A With my qualification that there is nothing that has come to their attention which enhances its value in the interim. .... Q ... And similarly, your understanding is that the board did not know about the mark-ups on the properties, isn't that right? A That is correct. We did not have any way of knowing what the King costs were. Q You personally did not know? A Neither knew nor expected to know. Q Do you recall testifying that with respect to a sale by King Resources to Fund of Funds, what usually happened would be an almost instantaneous or concurrent acquisition of a property and immediate transfer to Fund of Funds? A In many instances that was the case. It was not immediate transfer; there was always some time delay. And as I believe I have testified in this case, the procedure typically was for Mr. Boucher to call Mr. Cowett or someone in the King Organization to call Mr. Cowett and say, "we have this available. Do you want it?" or "Do you want your share of it?" Q Do you recall using these words? "As I understand it, what usually happened would be an instantaneous or concurrent acquisition of a property and immediate transfer to Fund of Funds." A I don't recall using those particular words. I could have. MR. REYCRAFT: Could you show the witness page 347 of his deposition transcript. A Well, I see it, but I believe I had previously explained what I just repeated here: that the procedure there would always be some delay. And by "almost instantaneous," I think that would embrace what I had in mind: a telephone call from Mr. Boucher to Mr. Cowett, and Mr. Cowett would say, "I will consider it. Send the invoice." And the invoice would arrive and he would either okay it or not. Q You did use the words that I quoted to you, did you not? A Yes, sir. Q You went on to say, did you not: "In those instances I believe that the compensation would be limited to the one-eighth overriding interest." A Yes, sir. Q You did not expect Fund of Funds to pay more for a property from King Resources than somebody else in the business would have gotten that property from King for? A No more than somebody else who was an existing customer of King or a from-time-to-time customer of King, what was described to us as industrial customers. Q Let me give you a hypothetical. Even if the fair market price of the fair market value of the natural resource interest was in excess of what King was selling to his 200-odd other industrial customers, you would have expected Fund of Funds to get that lower, most favored nations price, would you not? A If he offered the same property to us and to others Q Yes, sir. A I would expect us both to be offered the same price. Q Even if we would agree that the fair market value of it was in excess of that price? A Yes, sir, that would be part of what I have described as the most favored nations clause. Q That's what the most favored nations clause is all about, really, right? A Yes. We got the same price as was offered to other customers. Q Did it ever come to your attention that King Resources violated the most favored nations clause? A No, sir. Q Do you recall ever testifying that in fact you did find that out? A I don't recall that, no, sir. Q I would like to call your attention to the testimony that you gave in another case, pages 1555 through 1557, and read you the questions you were asked: "Q Did you ever try and determine whether or not Mr. King had violated the most favored nations agreement?" You answered: "In what time frame, sir? "Q At any time prior to this litigation." You said: "In the sense that I listened to certain reports by Keplinger & Associates, for one, and others to the extent they can be construed as with respect to charges made by King, including the assertion that the King organization had on occasion acquired properties one day and on the same day transferred them to us at a highly inflated value, inasmuch as I listened to those discussions and considered them, and that was a function of, among other things, of our outside counsel, Donovan Leisure to look into, I considered whether he complied with the most favored nation treatment in those respects." You were asked: "When you learned that King had sold properties acquired the same day at what you have described as a highly inflated price, did you believe that that act violated the most favored nation agreement?" You said: "Certainly." You were asked why, and you said, "Because I didn't believe that was the way that he treated his other industrial customers; and if it were, I felt that that was a considerable violation of our relationship [sic] to the extent that that occurred. "We were in the process of exploring that at the time that the permanent executive structure and new board of Global Natural Resource Properties was put into place. One reason for wanting skilled executives in the oil and natural gas area for Global Natural Resource Properties was to have them in place so that they could analyze the transactions in depth and decide what action if any was necessary to take against King Resources." You were asked: "If King overcharged everyone, including the industrial purchasers, why would that violate the most favored nation clause?" You said: "If that were a practice and to this date, incidentally, I do not know to what extent in fact that occurred, because the details of that I am confident were pursued by the permanent management of Global Natural Resources Properties when they went into place, and after March of 1971 when I went off the board of Global where I was there only temporarily, I had nothing, no further duties or responsibilities with respect to it, but if that had been the practice at Acapulco, to buy a property in the morning and sell it to us in the afternoon at a grossly inflated price, and if that were a general practice, I suppose that technically you would say Mr. King, that is, I suppose you could generally say that we were getting most favored nation treatment. All the favored nations in that event in my opinion would be treated grossly unfairly. "Had we known anything of that nature if it existed, and I had no reason to believe that it existed, we would never have entered into any kind of relationship with Mr. King. Also in view of the good faith nature of the relationship, if anything like that were contemplated to occur, it was encumbent [sic] on Mr. King to tell us at Acapulco." Now, you gave that testimony, did you not? A I want to say I misconstrued your question. Q I am sorry. A You asked me you are asking if at any time did I consider whether Mr. King had violated the most favored nations clause? Q If I wasn't clear, I apologize. .... Q But you did give those answers to those questions at this time, did you not? A At a date which was much later than I was talking about. I thought you were talking about during the existence of our Fund of Funds relationship with King Resources. Q No. In fact, during 1968, 1969 and 1970, you did not know of the overcharge, did you? MR. ROSS: I object to the form of the question. It has not been established in this case there has been a single overcharge on any property. THE COURT: Overruled. A I did not know of any overcharges if they existed, sir. Q You didn't know the extent of the mark-up either, did you? A I had no way of knowing that. I don't believe our management had any way of knowing that unless they inquired on each transaction. We had no procedure set up to inquire as to the costs of the King organization. Q For whatever reason, you didn't know? A No. [6] The figures for sales to other entities reflected on Px-740 include sales to both affiliates of KRC and non-affiliates. In fact, the average mark-up on KRC's sales of leases to affiliates over the relevant time period was greater than the average mark-up on KRC's sales of leases to non-affiliates. Compare Px-767 with Px-768. The method of calculating damages proposed by FOF and, in large amount, adopted by the jury permitted KRC and TCC to mark-up sales of natural resource interests to FOF by the same percentage as average yearly mark-ups on sales to all other entities. If the jury had not concluded that the most favored nation provision required pricing parity between FOF and all of King's knowledgeable industry customers, but only between FOF and non-affiliates, the average allowable mark-up would have been lower and damages would be higher than under Px-740. [7] Some other FOF exhibits illustrate AA's knowledge and concern for King's business practices. AA personnel had repeated, serious difficulties with King as a client at least since 1961. See, e.g., Px-1 to -3; Px-11; Px-14; Px-16. If dissatisfied with the Denver office's resolution of certain problems, King would speak directly with the highest echelon of the AA partnership in Chicago. [8] AA partner Robinson of the New York office testified that he told the Treasurer of IOS and Cowett that AA could accept Fox-Raff only because it was immaterial. TR 1937, 1981. Although Robinson testified that Fox-Raff was not an "irregularity" within the meaning of the letter of engagement, he deemed it important enough to report to the client (FOF). TR 2014-15. [9] AA's expert witness testified that: The auditors would take a long, hard look at any reporting of any sham, no matter what the effect was. The mere fact that it was a sham would be material, and if they knew it. TR 9579-80. Thus, AA's determination not to identify Fox-Raff as a fraud may well have been improper at the time. Although FOF does not claim damages as a result of Fox-Raff, AA's willingness to ignore King's fraud presaged the year end 1969 Arctic revaluation. [10] A similar non-arm's length transaction between Raff and King was arranged by King for the "Midbar" property. AA's Seattle and Denver offices knew the salient details of this transaction. TR 1347, 1356-57; Px-62; Px-62A; Px-349. The Seattle and Denver offices discussed the transaction. Px-362. [11] March testified that he received the Carr memorandum of November 7, mentioning Fox-Raff, TR 5498 99, but that he could not remember whether the notation "no take-out option" had reference to other "take-out" deals in King-arranged revaluations. TR 5508. The jury reasonably could find that March had Fox-Raff very much in mind in November 1969. [12] According to March, "one important development" in AA's decision to issue a "subject to" opinion concerning FOF was a newspaper account of statements made by Arthur Lipper at an IOS meeting in Europe, which could make it appear that AA took responsibility for the valuation. TR 5552-57. March insisted, however, that the language of the IOS Growth opinion was a qualification that could not justify an interpretation that AA was responsible for the valuation of the Arctic interest. TR 5553-54. [13] FOF contends that AA violated as many as seven generally accepted auditing standards ("GAAS"): (1) AA had a conflict of interest and lacked independence (at least after it learned of the high markups and sales not in accordance with the FOF-KRC arrangements); (2) AA failed to exercise due care (especially with regard to the Arctic revaluation); (3) AA failed to alert FOF to the defects in FOF's internal financial controls and such controls could not be relied on by AA; (4) AA gathered inadequate evidence to support its opinion on the revaluation; (5) in violation of generally accepted accounting principles ("GAAP"), there was inadequate disclosure of the FOF/KRC transactions, the inadequate internal controls, currently realizable value of FOF's assets, the financial weaknesses of Mecom and COG, Mecom's and COG's relationship with KRC, and the degree of risk carried by Mecom and COG; (6) AA did not reveal all material matters in the financials including the relationships between IOS and King, and between KRC, Mecom and COG; and (7) it was inappropriate not to qualify the FOF and FOF Prop financial statements as of December 31, 1968 and June 30, 1969 and a disclaimer or adverse opinion should have been made in the FOF and IOS Growth statements as of December 31, 1969. [14] Our decision on these alternatives makes it unnecessary to decide whether the NRFA was itself a security. However, FOF's position with respect to the NRFA has considerable support. See, e.g., Jenny v. Shearson, Hamill & Co., Inc. [1981] Fed.Sec.L.Rep. (CCH), ¶ 97,911 at 90,633 (S.D.N.Y.1981); Alvord v. Shearson Hayden Stone, Inc., 485 F. Supp. 848, 852-53 (D.Conn. 1980); Troyer v. Karcagi, 476 F. Supp. 1142, 1147 (S.D.N.Y.1979). AA did not address this contention in its motion papers, although it had previously been raised by FOF. [15] The decision of the Seventh Circuit not to address the "certificate of interest" claim was based, in part, upon the fact that plaintiff had no writing or agreement evidencing an interest in the pension plan. Daniel v. Intern. Bhd. of Teamsters, 561 F.2d 1223, 1230 n.15 (7th Cir. 1977), rev'd, 439 U.S. 551, 99 S. Ct. 790, 58 L. Ed. 2d 808 (1979). The factual predicate for applying a specific definition was thus missing. In this case, the facts justify reference to the specific definitional language. [16] AA disputes the presence of a "common enterprise" only on the absence of horizontal commonality. As we find that vertical commonality is the applicable standard, it is not necessary to address AA's argument on this point. We note, however, that some of the natural resource assets had investors other than King, KRC, TCC, and FOF. In fact, the posture of King entities as promoters and investors in all of these assets provides any horizontal commonality that may be required. [17] AA argues that Eric Scott, the FOF liaison director assigned to oversee NRFA affairs, was able to analyze the investments and determine whether FOF should exercise its rights as a partner in various separate joint ventures with the King group. AA's position mischaracterizes both the actual and the potential power in Scott's hands. Scott made a two-day trip to Denver to meet KRC and TCC personnel and examine their physical plant. He also received much of the minimal, uninformative documentation that was sent to Cowett concerning the interests KRC or TCC proposed to sell to FOF. That was the full extent of his actual liaison activities. Unfortunately, shortly after receiving this assignment, Scott had a heart attack and his participation in FOF activities declined. Moreover, there is no evidence that the individual liaison directors were to duplicate management functions or criticize or supervise the performance of the investment account advisors. Indeed, the same meeting at which the liaison function was adopted approved an expanded FOF Board of Directors "to serve as a source of advisory boards for each of the Proprietary Fund Accounts." Px-32. In sum, the limited role played by Scott appears consistent with the ephemeral concept of liaison directors and does not evidence FOF's actual or potential independence from King. [18] AA's argument that an accountant cannot be a primary violator of section 10(b) is without merit. First, Rule 10b-5 applies by its terms to any person who, directly or indirectly, schemes to defraud or engages in an act or course of conduct constituting fraud. Second, controlling cases and other private actions recognize a cause of action against accountants as primary violators. Sharp v. Coopers & Lybrand, 457 F. Supp. 879, 887 (E.D.Pa.1978), aff'd, 649 F.2d 175, 184 (3d Cir. 1981) (Coopers & Lybrand was held liable on the basis of respondeat superior for a non-partner's primary fraud); Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, 378 F. Supp. 112, 121 (S.D.N. Y.1974), aff'd in part & rev'd in part, 540 F.2d 27 (2d Cir. 1976); Seiffer v. Topsy's Intern. Inc., 487 F. Supp. 653, 667 (D.Kan.1980). Third, accountants have been held liable as violators in actions by the SEC. SEC v. Coffey, 493 F.2d 1304, 1315 n.24 (6th Cir. 1974), cert. denied, 420 U.S. 908, 95 S. Ct. 826, 42 L. Ed. 2d 837 (1975); SEC v. Senex Corp., 399 F. Supp. 497, 507 (D.Kan.1975), aff'd on other grounds, 534 F.2d 1240 (6th Cir. 1976). [19] AA contends that only sellers of securities, and not purchasers, have a private right of action under section 10(b). The cases and language to the contrary are legion. E.g., Ernst & Ernst v. Hochfelder, 425 U.S. 185, 196, 96 S. Ct. 1375, 1382, 47 L. Ed. 2d 668 (1976); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730-32, 747, 95 S. Ct. 1917, 1922-23, 1931, 44 L. Ed. 2d 539 (1975); Mallis v. FDIC, 568 F.2d 824, 830 (2d Cir. 1977), cert. dismissed, 435 U.S. 381, 98 S. Ct. 1117, 55 L. Ed. 2d 357 (1978); Birnbaum v. Newport Steel Corp., 193 F.2d 461, 463 (2d Cir.), cert. denied, 343 U.S. 956, 72 S. Ct. 1051, 96 L. Ed. 1356 (1952). Aiding and abetting liability under section 10(b) is also well established. Rolf v. Blyth Eastman Dillon & Co., Inc., 570 F.2d 38, 44-47 (2d Cir.), cert. denied, 439 U.S. 1039, 99 S. Ct. 642, 58 L. Ed. 2d 698 (1978); ITT v. Cornfeld, 619 F.2d 909, 927 28 (2d Cir. 1980). [20] AA contends that recent Supreme Court cases and Second Circuit precedent leave the issue of a private right of action under section 17(a) an open question. The Supreme Court does consider the issue of a private right of action under section 17(a) to be unsettled. E.g., Intern Bhd. Teamsters v. Daniel, 439 U.S. 551, 557 n.9, 99 S. Ct. 790, 795 n.9, 58 L. Ed. 2d 808 (1979). The Second Circuit, however, has expressly ruled that a private right of action under section 17(a) does exist. In Kirshner v. United States, 603 F.2d 234 (2d Cir. 1978), cert. denied, 442 U.S. 909, 99 S. Ct. 2821, 61 L. Ed. 2d 274 (1979), the Second Circuit adopted the holding of the Seventh Circuit in Daniel "that the language of section 17 is broad enough to imply a private right of action". Id. at 241. In a subsequent case, another panel of the Second Circuit overlooked Kirshner in its initial decision and stated that the question whether section 17 provides a private right of action was "as yet undecided in this circuit". Wigand v. Flo-Tek, Inc., 609 F.2d 1028 (2d Cir. 1979). An amendment to the Wigand decision recognized Kirshner as controlling precedent, although it concluded that the case did not present any issue under section 17 on appeal. Id. at 1038. Since Kirshner and Wigand, several opinions in the Southern District have granted private rights of action under section 17. Anschutz Corp. v. Kay Corp., 507 F. Supp. 72, 75 (S.D.N. Y.1981) (Lasker, D. J.); Steinberg v. Carey, 470 F. Supp. 471, 475 n.13 (S.D.N.Y.1979) (Weinfeld, D. J.); but see Marbury Management, Inc. v. Kohn, 470 F. Supp. 509, 514-15 n.9 (S.D.N.Y. 1979) (Gagliardi, D.J.) (no citation to either Kirshner or Wigand), modified on other grounds, 629 F.2d 705 (2d Cir.), cert. denied, 449 U.S. 1011, 101 S. Ct. 566, 66 L. Ed. 2d 469 (1980); In re New York City Municipal Securities Litigation, 507 F. Supp. 169, 187 (S.D.N.Y. 1890) (Owen, D.J.) (no private right of action against municipal issuers under section 17); Eriksson v. Galvin, 484 F. Supp. 1108, 1127 (S.D.N.Y.1980) (Tenney, D.J.) (no right of action under section 17 qualified by the holding that even if such a right existed, plaintiff failed to prove a case; no mention of either Kirshner or Wigand). The holding of the Second Circuit that a private right of action exists under section 17 is in accord with the Seventh and Fourth Circuits, Lincoln Nat'l Bank v. Herber, 604 F.2d 1038, 1040 n.2 (7th Cir. 1979); Newman v. Prior, 518 F.2d 97, 99 (4th Cir. 1975), but clashes with the Eighth Circuit, Shull v. Dain, Kalman & Quail, Inc., 561 F.2d 152, 159 (8th Cir. 1977), cert. denied, 434 U.S. 1086, 98 S. Ct. 1281, 55 L. Ed. 2d 792 (1978). Given a private damage remedy for section 17(a) violations, there seems little point in denying that one who aids and abets a section 17(a) violation is liable as a principal violator. Civil damage cases generally recognize aiding and abetting causes of action under section 17(a). City Nat'l Bank v. Vanderboom, 290 F. Supp. 592, 608-09 (W.D.Ark.1968), aff'd, 422 F.2d 221 (8th Cir.), cert. denied, 399 U.S. 905, 90 S. Ct. 2196, 26 L. Ed. 2d 560 (1970); Buttrey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 410 F.2d 135, 144 (7th Cir. 1969), cert. denied, 396 U.S. 838, 90 S. Ct. 98, 24 L. Ed. 2d 88 (1969); Resource Investors Group v. Natural Resource Investment Corp., 457 F. Supp. 194, 200, (D.Mich.1978). SEC injunction actions under section 17(a) also invoke aiding and abetting. E.g., SEC v. Coven, 581 F.2d 1020, 1025-26 (2d Cir. 1978), cert. denied, 440 U.S. 950, 99 S. Ct. 1432, 59 L. Ed. 2d 640 (1979); SEC v. National Student Marketing Corp., 457 F. Supp. 682, 712-14 (D.D.C.1978). [20.5] Identification of material misrepresentations or omissions distinguish this case from Santa Fe v. Green, 430 U.S. 462, 474, 475 n.15, 97 S. Ct. 1292, 1301, 51 L. Ed. 2d 480 (1977), relied on by AA for the proposition that mere breach of fiduciary duty in connection with a securities transaction is not actionable under section 10(b). Id. at 472, 97 S.Ct. at 1300. [21] Defendants typically overstated contention that "[i]t thus appears to be uniformly recognized in all states that an omission cannot form the basis for common law fraud, and that there must be an express misrepresentation of a material fact", based on a slender authoritative reed, is of little assistance in this case. The primary issues are: (1) whether AA's affirmative statements were misrepresentations of fact; (2) whether AA's statements were misleading in omitting to state material information; and (3) whether AA had any duty to disclose information that was withheld, as required to establish a civil fraud claim for nondisclosure. The charge to the jury concerning omissions and common law fraud was as follows: In considering whether or not a false representation of material fact was made by defendants, you should be guided by my earlier instructions to you concerning false statements and materiality under the federal securities laws. The standards in each instance are the same. Just as in the case of the federal securities laws, liability under the common law may also be based upon non-disclosure of material facts in certain circumstances. Thus, the requirement of a "misrepresentation" is satisfied where the defendant has failed to disclose facts necessary to keep other statements that it did make from being misleading or where the defendant fails to disclose information despite a relationship of trust and confidence with the plaintiffs. TR 11,707. The earlier instruction to which the jury is expressly referred states: To find defendants liable for failing to tell the plaintiffs certain information, you must find that the information provided to the plaintiffs was misleading in light of the information that was not revealed. A statement is misleading if it creates a misapprehension of the true state of affairs. The securities laws recognize that a misleading effect may be created by half-truths. A misleading impression may also be created where someone with a duty of disclosure fails to make any disclosure, although it knows information that is within its duty to disclose. TR 11,688-89. The duties of the parties were also detailed: At a minimum, independent auditors verify the addition and subtraction of its client's bookkeeper and examine the accounting procedures and practices and internal financial control mechanisms of its clients. An independent auditor is supposed to be an outsider, independent of the client's management. After examining the financial statements prepared by the client, in accordance with generally accepted auditing standards, the auditor expresses an opinion as to whether such financial statements at a particular date and the reported results of particular operations for a particular period have been fairly presented by the client. An independent auditor has an unqualified duty to its client and to persons that it knows will rely on its statements or reports to state the facts, whether favorable or unfavorable, required to present a full and fair picture of its client's financial conduct. The investigative procedures necessary to be able to do so vary with the circumstances and the client. Greater diligence may be required if there is reason to doubt that the transactions between any one or more members of the King Group and plaintiffs were being honestly conducted or if the problems confronted are unique. An auditor may have a duty to correct any misstatements, omissions or deceptive practices that they discover, especially where they knew or should have known that the client or its shareholders will rely on the auditor's determination. TR 11,703-04. United States v. Amrep Corp., 560 F.2d 539, 543 (2d Cir. 1977), cert. denied, 434 U.S. 1015, 98 S. Ct. 731, 54 L. Ed. 2d 759 (1978). [22] We need not decide whether New York or Colorado law applies to the breach of contract claim. AA only contends that Swiss law applies and, if Swiss law does not apply, New York law applies to bar the breach of contract claim. There is no contention that Colorado law is applicable or that Colorado law is materially different from New York law. [23] This construction of the letter of engagement reflects AA's understanding of the breach of contract claim, as set out in Defendant's Requests to Charge Nos. 71-74, filed July 23, 1981. It was also reflected in AA's discussion of the breach of contract claim at TR 11,054-55. [24] Additionally, the jury reasonably could find that AA undertook special contractual duties guaranteeing a specific result in connection with the revaluation. This claim was stated in the summary of the parties' contentions (TR 11,678), although the jury instructions regarding breach of contract referred primarily to the contract of engagement (TR 11,710). It was abundantly clear, however, that in a series of communications culminating in March's December 23, 1969 telex to FOF (Px-190), AA agreed to determine whether the revaluation was made in accordance with FOF's guidelines. A failure to properly perform such an express representation may constitute a breach of contract claim as to which a six-year limitations period attached. [25] We do not need to reconsider at this point the questions of: causation (AA Brief at 424); applicability of section 17 (id. at 444); aiding and abetting under section 17 (id. at 445); scienter under section 17 (id. at 446); recklessness and aider and abettor liability (id. at 436); reliance (id. at 439, 440); materiality (id. at 442); applicability of Rule 10b 5(2) (id. at 439); deceptive practices (id. at 440); and elements of common law fraud (id. at 447). [26] AA singles out one sentence out of several sentences and argues that it should have been repeated in connection with our recitation of the elements of a primary fraud at TR 11,699-700. In providing a checklist reminder to the jury of the elements of primary fraud, we were not required to repeat any or all of the substantive charge on primary fraud. The reminder is quite obviously a reference to TR 11,690 92, about which AA does not complain. Even more frivolous is AA's contention that we failed to instruct that the false representations necessary to prove common law fraud must have been made by AA. We began the discussion of common law fraud with the overview: "Plaintiff's claim that the defendant's conduct amounts to common law fraud with respect to both the overcharge claims and the revaluation claims". TR 11,705 (emphasis added). We thereafter listed the elements of proof required to sustain this claim: "First a representation of a material fact. Two, the falsity of that representation. [N.B.: AA's selective quotation ends here] Three, that defendants acted with scienter. Four, that the plaintiffs relied upon the misrepresentation, and five, that the plaintiffs suffered damages as a result of their reliance". TR 11,706 (emphasis added). There follows immediately an elaboration of the five elements, beginning "[i]n considering whether or not a false representation of a material fact was made by defendants ...". TR 11,707 (emphasis added). Quotation of another explicit reference to AA's conduct at TR 11,707 is unnecessary to dispose of this baseless claim. It is also unnecessary to consider at length AA's contention that inclusion of section 17(a)(2) in the charge permitted the jury to conclude that AA could be found liable for violating section 17(a)(2) merely because it charged a fee for its services. AA Brief at 445. The charge explicitly repudiated any such theory. The jury was instructed that AA could not be found liable as a primary violator of section 17(a)(2). TR 11,685-86. AA's contention that we conveyed the prejudicial and erroneous impression to the jury that John Orr, FOF's liquidator, possessed different rights from FOF is similarly without merit. To identify the parties who had been referred to throughout the trial, we instructed the jury as follows: Plaintiffs are the Fund of Funds, Ltd. we call them FOF FOF Propriety Funds, Ltd., sometimes referred to as FOF Prop or Prop, and IOS Growth Fund, Ltd., also known as Transglobal Growth Fund, Ltd. All of the plaintiffs are Canadian corporations. The Fund of Funds, which, as I said, I may refer to as FOF, and IOS Growth Fund, are open-ended mutual funds. FOF Proprietary Funds is a wholly owned subsidiary of FOF. John Orr is the permanent liquidator of FOF and IOS Growth Fund, and he also controls FOF Proprietary Funds in that capacity. He was appointed permanent liquidator of these companies by the Supreme Court of the Province of Ontario, Canada, on August 1, 1973. As permanent liquidator, he stands in the place of these entities and the shareholders for the purpose of protecting their interests. I shall refer to the entities under the control of John Orr, collectively, as the plaintiffs throughout this charge. Defendants in this case are Arthur Andersen & Co., Arthur Andersen & Co. (Switzerland). I shall refer throughout this charge to these parties collectively as the defendants. The defendants are engaged in practicing the profession of accounting and auditing. TR 11,660-61. The charge expressly states that Orr represents "these entities and the shareholders." TR 11,661 (emphasis added). It was emphasized that "the entities under the control of John Orr" would be referred to as "plaintiffs" in the body of the charge. Id. There was never any issue in the case as to Orr, his rights or responsibilities under Canadian law, or as to the shareholders. AA's counsel conceded that the sentence now challenged did not contain any inference that acts and decisions of FOF in 1968 70 were not attributable to FOF because Orr now represents the company. TR 11,318. In closing arguments, moreover, AA's counsel specifically raised the issue that the FOF Board was in control at the time of the transactions at issue, and not Orr, and that FOF was accountable for its acts. TR 11,293. This aspect of the case was taken up by the charge concerning justifiable reliance. TR 11,694-96. [27] Complicating the picture still more is the fact that churning claims, which arise under sections 17(a) and 10(b) but do not require scienter, have long applied a preponderance standard. E.g., Dzenits v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 F.2d 168, 171 n.2 (10th Cir. 1974); Fey v. Walston & Co., Inc., 493 F.2d 1036, 1049 (7th Cir. 1974); Hecht v. Harris, Upham & Co., 430 F.2d 1202, 1209 (9th Cir. 1970). [28] Section 201 provides, in pertinent part: (d) Whoever, directly or indirectly, corruptly gives, offers, or promises anything of value to any person, or offers or promises such person to give anything of value to any other person or entity, with intent to influence the testimony under oath or affirmation of such first-mentioned person as a witness upon a trial, hearing, or other proceeding, before any court ... (e) Whoever, directly or indirectly, corruptly asks, demands, exacts, solicits, seeks, accepts, receives, or agrees to receive anything of value for himself or for any other person or entity in return for being influenced in his testimony under oath or affirmation as a witness upon any such trial, hearing, or other proceeding ... Shall be fined not more than $20,000 or three times the monetary equivalent of the thing of value, whichever is greater, or imprisoned for not more than fifteen years, or both, and may be disqualified from holding any office of honor, trust, or profit under the United States.... .... (h) Whoever, directly or indirectly, gives, offers, or promises anything of value to any person, for or because of the testimony under oath or affirmation given or to be given by such person as a witness upon a trial, hearing, or other proceeding, before any court ... (i) Whoever, directly or indirectly, asks, demands, exacts, solicits, seeks, accepts, receives, or agrees to receive anything of value for himself for or because of the testimony under oath or affirmation given or to be given by him as a witness upon any such trial, hearing, or other proceeding, or for or because of his absence therefrom Shall be fined not more than $10,000 or imprisoned for not more than two years, or both. (j) Subsections (d), (e), and (i) shall not be construed to prohibit the payment or receipt of witness fees provided by law, or the payment, by the party upon whose behalf a witness is called and receipt by a witness, of the reasonable cost of travel and subsistence incurred and the reasonable value of time lost in attendance at any such trial, hearing, or proceeding, or in the case of expert witnesses, involving a technical or professional opinion, a reasonable fee for the time spent in the preparation of such opinion, and in appearing and testifying. Hamilton v. General Motors Corporation, 490 F.2d 223 (7th Cir. 1973), where the court affirmed the dismissal of an implied contract claim by the estate of a non-expert witness seeking compensation for services relating to litigation involving General Motors, is instructive as to the strong public policy against payments to fact witnesses. Id. at 227-28. There is nevertheless a great difference between questionable payments to witnesses and subornation of perjury. Defendant's citation in support of vacating the judgment for improper payment concerns evident perjury, not potentially questionable payments. Peacock Records, Inc. v. Checker Records, Inc., 365 F.2d 145, 147 (7th Cir. 1966), cert. denied, 385 U.S. 1003, 87 S. Ct. 707, 17 L. Ed. 2d 542 (1967). [29] FOF and not NRC was the purchaser of the CSADC and Port Gentil interests. [30] We also considered and rejected AA's contention that the expert testimony of Main, Hurdman accountants Ackerman and Johnson was so biased, erroneous and inconsistent as to render the verdict invalid. Most of the instances of inaccurate or inconsistent testimony cited by AA are matters for the jury to consider in weighing the evidence. The jury was specifically instructed to "give the testimony of these witnesses such weight as you may think it deserves" and to assess bias, prejudice, insufficient education or experience. TR 11,671. The problems encountered by the expert witnesses in relating the reasons for their opinions were no more serious or prejudicial than ordinarily encountered by witnesses. AA bases its claim of a miscarriage of justice on little more than effective cross-examination and testimony by its own expert disagreeing with FOF's experts' opinions. [31] By this shorthand reference, we do not mean to limit the issues posed at greater length above. [32] AA stresses that King's cost was not a meaningful measure of the value of the assets at the time of sale to FOF in part "because plaintiffs have not shown the dates KRC or TCC purchased the properties, or how long such properties had been held by KRC and TCC, or the costs incurred in holding such properties during such period, or from whom the properties had been purchased, or in what market". The damage award as modified by the court does, in fact, take King's collateral costs into account. Information concerning the holding period of the natural resource assets that FOF allegedly failed to prove is relevant only to the extent that intervening strikes or other circumstances would permit the King group to charge FOF a price greater than cost plus average markup. There was evidence from which the jury could find that most interests sold to FOF were purchased by King for that purpose shortly before resale, thus minimizing, if not entirely eliminating, the impact of the proof AA seeks. To the extent that such proof might have been probative, no proof of this sort in mitigation of FOF's claimed damages was introduced by AA. AA also contends that FOF's damage charts failed to consider the potential value of the interests. First, it is highly likely that King's purchase price included an assessment of the value of the interests by a knowledgeable industry purchaser and the jury could find that to have been true. Second, the jury reasonably could find that the potential value of an interest was not the basis upon which pricing was determined according to the FOF/KRC agreement. Third, AA could have shown that different values were appropriate, but did not do so in a timely fashion. [33] We do not agree that the fact that AA did not commence its audit of TCC until year end 1969 requires a finding that AA's conduct was not in connection with or causally related to FOF's transactions with TCC. AA's misrepresentations and omissions concerning the KRC-FOF relationship had direct foreseeable effects upon the future purchases of natural resource interests by FOF from the King group. [34] An alternative method of allocating KRC's indirect costs among KRC's various clients might use a ratio of gross sales to FOF and other entities or gross profits on sales to FOF and other entities. We do not consider King's indirect costs in proportion to gross sales or gross profit as those figures were inflated by the fraudulent overcharges. [35] We hereby apply the general rule that "a court should reconcile the jury's verdict if at all possible". Henry v. A/S Ocean, 512 F.2d 401, 406 (2d Cir. 1975) (citing Gallick v. Baltimore & Ohio R.R., 372 U.S. 108, 83 S. Ct. 659, 9 L. Ed. 2d 618 (1963)). On the facts of this case, we have little difficulty in rationalizing what might appear as an inconsistency upon a quick reading. [36] AA's extensive submission concerning the actual return realized and future return anticipated by NRC on the 3% ORRI as of year end 1980 is irrelevant. The value of the settlement ought generally to be fixed as of the date of settlement. [37] We do not accept FOF's argument that this aspect of the primary settlement merely resolved the legal dispute concerning the validity of the NOPI. FOF argues that GAIL owned and properly challenged the NOPI as to the Canadian Arctic interests. The interests included in paragraph B of the primary settlement include all properties wherever located. Moreover, FOF's contention that GAIL did not own any overcharge claims and could not have settled them clearly does not apply to this arrangement between NRC and KRC. [38] FOF also argues the merits of the dispute between NRC and FOF concerning which party could assert the overcharge claims. We reject the latter argument for the reasons stated above. FOF is not entitled to an advisory opinion determining the disputed right to assert various claims between NRC and FOF. By virtue of NRC's ratification and the division of any proceeds resulting from this suit, NRC's settlement of the KRC bankruptcy is attributable to FOF if the claims settled are related to this suit.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2987705/	February 12, 2013. JUDGMENT The Fourteenth Court of Appeals IN THE INTEREST OF J.R.W., A CHILD NO. 14-12-00850-CV ________________________________ This cause, an appeal from a judgment terminating parental rights signed on August 31, 2012, was heard on the transcript of the record. We have inspected the record and find no error in the judgment. We order the judgment of the court below AFFIRMED. We further order this decision certified below for observance. We further order the mandate be issued immediately.	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/4555662/	08/13/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT JACKSON Assigned on Briefs May 5, 2020 MICHAEL CORY HALLIBURTON v. STATE OF TENNESSEE Appeal from the Criminal Court for Shelby County No. 14-04181 J. Robert Carter, Jr., Judge ___________________________________ No. W2019-01458-CCA-R3-PC ___________________________________ The Petitioner, Michael Cory Halliburton, appeals the denial of his petition for post- conviction relief, asserting that he received ineffective assistance of counsel. After review, we affirm the denial of the petition. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Affirmed ALAN E. GLENN, J., delivered the opinion of the court, in which THOMAS T. WOODALL and D. KELLY THOMAS, JR., JJ., joined. Benjamin B. Wilkins, Memphis, Tennessee, for the appellant, Michael Cory Halliburton. Herbert H. Slatery III, Attorney General and Reporter; Ronald L. Coleman, Assistant Attorney General; Amy P. Weirich, District Attorney General; and Leslie Byrd, Assistant District Attorney General, for the appellee, State of Tennessee. OPINION FACTS The Petitioner was convicted of attempted first-degree premeditated murder, two counts of aggravated assault, and one count of domestic assault, arising out of the vicious beating of his wife with a metal knife sharpener after she told him that she was filing for divorce. State v. Michael Halliburton, No. W2015-02157-CCA-R3-CD, 2016 WL 7102747, at *1 (Tenn. Crim. App. Feb. 6, 2016), perm. app. denied (Tenn. 2017). The Petitioner asserted at trial that he was insane at the time of the attack or, in the alternative, was incapable of forming the requisite culpable mental states for the offenses. Id. The trial court imposed a sentence but, after doing so, granted the Petitioner’s motion for new trial and recused itself from presiding over the new trial. Id. This court granted the State’s motion for an extraordinary appeal and remanded the matter for a new sentencing hearing and hearing on the motion for new trial. Id. The successor trial court approved the jury’s verdict and, after merging the Petitioner’s convictions for aggravated assault and domestic assault with his attempted first-degree murder conviction, imposed a sentence of twenty- one years in the Department of Correction. Id. This court affirmed his convictions and sentence on direct appeal, and the Tennessee Supreme Court denied his application for permission to appeal. Id. The Petitioner filed a timely pro se petition for post-conviction relief in which he generally alleged ineffective assistance of counsel but provided no specific facts to support his allegation. Thereafter, appointed counsel filed an almost eighty-page amended petition. Along the same vein as one of the Petitioner’s assertions on appeal, in his amended petition, the Petitioner claimed that “[i]neffective assistance of trial counsel to have denigrated the [Petitioner].” The Petitioner also raised numerous specific allegations of ineffective assistance of counsel but did not raise the two other allegations asserted on appeal: that trial counsel was ineffective for not keeping the defense expert witness in the courtroom during the testimony of the State’s expert and not having the defense expert testify in surrebuttal. The post-conviction court conducted an evidentiary hearing, at which the Petitioner began by testifying about the stressors that he experienced leading up to the attack and why he snapped. Asked if he and counsel discussed the brief psychotic disorder defense, the Petitioner said, “it really wasn’t a discussion.” However, he acknowledged that counsel pursued such defense, as was his desire, and that counsel explained to him that he would have the burden of proof, which involved “call[ing] an expert” to testify. The Petitioner testified that counsel communicated two pretrial settlement offers to him, one of which included no jail time, but said that counsel used insulting obscenities when the Petitioner expressed his desire to not accept the offers. Counsel and counsel’s law partner advised the Petitioner to take the offer and told the Petitioner that “there was something wrong with [him]” for rejecting it. They asked the Petitioner if he “want[ed] to go to prison and be raped and extorted[.]” The Petitioner said that counsel badgered him until the point that he started crying. Thereafter, the Petitioner addressed some of his other issues in an argumentative fashion at times and then essentially read his amended petition into the record to complain of the various reasons counsel was ineffective. Dr. John Ciocca testified that he believed the Petitioner had suffered a brief psychotic episode during the events in question and explained what that entailed and the -2- reasons behind his opinion. Dr. Ciocca acknowledged that he was able to explain to the jury at trial some of the stressors that the Petitioner experienced that led to his brief psychotic episode but said that there were some stressors to which he was not allowed to testify. Dr. Ciocca testified that trial counsel did not ask him to stay in the courtroom after the conclusion of his testimony and, therefore, he did not observe the Petitioner’s testimony or the State’s expert rebuttal proof. He was aware that the State was likely to call an expert witness who had “viewed records and . . . had a very brief interview with [the Petitioner].” He was not sure whether the State’s expert “was representing that she had done a full and comprehensive evaluation or whether she was just preparing to be a rebuttal witness to my testimony.” Dr. Ciocca acknowledged that the Petitioner’s family would have incurred an additional charge in order for him to be present in the courtroom for the testimony of the Petitioner or the State’s expert. However, he said that he would have been willing to stay “even if payment was not immediately forthcoming.” The Petitioner’s trial counsel testified that the Petitioner “was without a doubt the most difficult client I’ve ever had and probably will go down at the end of my career as the most difficult client I’ve ever had.” He recalled that the Petitioner “did not want to take [his] advice on . . . pretty much everything” and that “it got to a point where [counsel] just started kind of doing what [the Petitioner] wanted [him] to, even though it went against what [counsel] would have done had [he] been making the decisions.” Despite having difficulties with the Petitioner, counsel said that they were able to develop a strategy for trial to pursue a defense of not guilty by reason of insanity with diminished capacity as an alternate theory. Counsel noted that “the strategy I wanted to go with took a backseat to what my client insisted on putting forward as a defense.” Counsel testified that he brought in Dr. Ciocca to assist in the Petitioner’s defense and made sure he had access to the Petitioner’s medical records. Counsel said that he did not instruct Dr. Ciocca to remain in the courtroom to observe the testimony of the Petitioner or the State’s rebuttal expert. He acknowledged that it was “theoretically possible” that Dr. Ciocca could have been recalled to explain some of the Petitioner’s testimony to the jury in respect to his diagnosis. Counsel was asked about potentially recalling Dr. Ciocca to offer some rebuttal of the State’s expert, to which he responded that he did not see any “reason to have him come sit and listen to her testimony” because counsel “would have talked to [Dr. Ciocca] ahead of time about cross-examination of their expert and what I anticipated her testimony to be.” Counsel reiterated that he pursued the not guilty by reason of insanity defense at the Petitioner’s insistence, even though “[i]t is a very difficult defense.” He said that “the proof that was presented, the defense that was put on, it was exactly what the [Petitioner] -3- asked for.” He elaborated that “many pieces of advice I gave [the Petitioner] were disregarded,” but counsel felt that he “did everything [he] could to save [the Petitioner] from himself.” Regardless of the Petitioner’s being a difficult client, counsel did not believe that communication between them had completely broken down. He said that, “instead of withdrawing [from the case], [he] just did exactly what [the Petitioner] wanted [him] to do.” The post-conviction court entered a written order denying relief, in which it found that the Petitioner “has not prove[n] that his trial attorney’s performance was deficient. [The] Petitioner simply does not accept the fact that the jury did not agree with him.” The post-conviction court did not specifically address the relationship between the Petitioner and trial counsel or the defense expert’s not being present during different phases of trial, presumably because such claims were not explicitly raised in the petition. ANALYSIS On appeal, the Petitioner argues that counsel rendered ineffective assistance by: (1) failing to keep Dr. Ciocca, his mental health expert, in the courtroom to observe his testimony and that of the State’s rebuttal expert witness and not calling Dr. Ciocca to testify in surrebuttal; and (2) allowing for the relationship between the Petitioner and counsel to deteriorate resulting in poor communication. The State asserts that the Petitioner’s claims regarding Dr. Ciocca are waived because they were not specifically raised in his petition and therefore not addressed by the post-conviction court. Post-conviction relief “shall be granted when the conviction or sentence is void or voidable because of the abridgment of any right guaranteed by the Constitution of Tennessee or the Constitution of the United States.” Tenn. Code Ann. § 40-30-103. The petitioner bears the burden of proving factual allegations by clear and convincing evidence. Id. § 40-30-110(f). When an evidentiary hearing is held in the post-conviction setting, the findings of fact made by the court are conclusive on appeal unless the evidence preponderates against them. See Wiley v. State, 183 S.W.3d 317, 325 (Tenn. 2006). When reviewing factual issues, the appellate court will not reweigh the evidence and will instead defer to the post-conviction court’s findings as to the credibility of witnesses or the weight of their testimony. Id. However, review of a post-conviction court’s application of the law to the facts of the case is de novo, with no presumption of correctness. See Ruff v. State, 978 S.W.2d 95, 96 (Tenn. 1998). The issue of ineffective assistance of counsel, which presents mixed questions of fact and law, is reviewed de novo, with a presumption of correctness given only to the post-conviction court’s findings of fact. See Fields v. State, 40 S.W.3d 450, 458 (Tenn. 2001); Burns v. State, 6 S.W.3d 453, 461 (Tenn. 1999). -4- To establish a claim of ineffective assistance of counsel, the petitioner has the burden to show both that trial counsel’s performance was deficient and that counsel’s deficient performance prejudiced the outcome of the proceeding. Strickland v. Washington, 466 U.S. 668, 687 (1984); see State v. Taylor, 968 S.W.2d 900, 905 (Tenn. Crim. App. 1997) (noting that the same standard for determining ineffective assistance of counsel that is applied in federal cases also applies in Tennessee). The Strickland standard is a two-prong test: First, the defendant must show that counsel’s performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the “counsel” guaranteed the defendant by the Sixth Amendment. Second, the defendant must show that the deficient performance prejudiced the defense. This requires showing that counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable. 466 U.S. at 687. The deficient performance prong of the test is satisfied by showing that “counsel’s acts or omissions were so serious as to fall below an objective standard of reasonableness under prevailing professional norms.” Goad v. State, 938 S.W.2d 363, 369 (Tenn. 1996) (citing Strickland, 466 U.S. at 688; Baxter v. Rose, 523 S.W.2d 930, 936 (Tenn. 1975)). Moreover, the reviewing court must indulge a strong presumption that the conduct of counsel falls within the range of reasonable professional assistance, see Strickland, 466 U.S. at 690, and may not second-guess the tactical and strategic choices made by trial counsel unless those choices were uninformed because of inadequate preparation. See Hellard v. State, 629 S.W.2d 4, 9 (Tenn. 1982). The prejudice prong of the test is satisfied by showing a reasonable probability, i.e., a “probability sufficient to undermine confidence in the outcome,” that “but for counsel’s unprofessional errors, the result of the proceeding would have been different.” Strickland, 466 U.S. at 694. Courts need not approach the Strickland test in a specific order or even “address both components of the inquiry if the defendant makes an insufficient showing on one.” 466 U.S. at 697; see also Goad, 938 S.W.2d at 370 (stating that “failure to prove either deficiency or prejudice provides a sufficient basis to deny relief on the ineffective assistance claim.”). As to the Petitioner’s complaint that counsel failed to keep Dr. Ciocca in the courtroom to observe his testimony and that of the State’s rebuttal expert witness and not call Dr. Ciocca to testify as a surrebuttal witness, regardless of any potential waiver, the Petitioner has failed to prove that he received ineffective assistance of counsel. At the -5- evidentiary hearing, Dr. Ciocca testified that the Petitioner’s family would have incurred an additional charge for his continued presence in the courtroom. Counsel testified that he did not see any “reason to have [Dr. Ciocca] come sit and listen to [the State’s expert’s] testimony” because counsel consulted with Dr. Ciocca ahead of time about his cross- examination of the State’s expert based on her anticipated testimony. We cannot conclude that counsel’s advance preparation and not incurring additional expense was deficient so as to fall below an objective standard of reasonableness. In addition, the Petitioner did not elicit proof at the evidentiary hearing regarding what questions Dr. Ciocca could have suggested to counsel had he remained in the courtroom that would have called the State’s expert’s testimony into question or what proof Dr. Ciocca could have offered had he been called in surrebuttal. Therefore, the Petitioner has not met his burden of establishing prejudice. As to the Petitioner’s complaint that counsel allowed the relationship between him and counsel to deteriorate resulting in poor communication, the Petitioner is likewise not entitled to post-conviction relief. In support of his claim, the Petitioner points to the “hostility expressed” between him and counsel at the evidentiary hearing, as well as counsel’s communication of a plea offer with “resort to obscenity” rather than “with consideration to the burden of proof.” However, counsel testified that despite his difficulties with the Petitioner, he did not believe that communication between them had completely broken down and they were able to develop a strategy for trial. Counsel noted that “the strategy I wanted to go with took a backseat to what my client insisted on putting forward as a defense” and that “the proof that was presented, the defense that was put on, it was exactly what the [Petitioner] asked for.” The Petitioner attempts to sidestep his insistence in which defense to pursue by alleging “but for the animosity grown out of their professional relationship[, he] would have had the opportunity to understand what was required in presenting his defense.” However, the Petitioner acknowledged at the evidentiary hearing that counsel discussed the burden of proof with regard to the trial strategy of a brief psychotic disorder. Counsel communicated with the Petitioner and presented the defense the Petitioner chose to present. The Petitioner has failed to prove that counsel performed deficiently or that any deficiency caused him prejudice. CONCLUSION Based on the foregoing authorities and reasoning, we affirm the denial of the petition. ____________________________________ ALAN E. GLENN, JUDGE -6-	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/1422806/	398 F. Supp. 1057 (1975) WEIGHT WATCHERS OF QUEBEC LTD. and Weight Watchers of Manitoba Ltd., Plaintiffs, v. WEIGHT WATCHERS INTERNATIONAL, INC., Defendant. No. 73 C 1121. United States District Court, E. D. New York. July 30, 1975. Hammond & Schreiber, P. C., New York City, for plaintiffs; by Dale A. Schreiber, New York City. Davis, Gilbert, Levine & Schwartz, New York City, for defendant; by Patricia Hatry, New York City. MEMORANDUM AND ORDER NEAHER, District Judge. Defendant moves for an order directing arbitration in accordance with the 1058 agreement of the parties, and for a stay of the action pending completion of such arbitration. Arguing waiver and non-arbitrability of their claims, plaintiffs oppose. The court finds that although the claims are arbitrable defendant has, under the circumstances present here, waived its right to arbitration. I. Plaintiffs' non-arbitrability argument may be quickly disposed of. The basic facts underlying this dispute and the procedural history of this case are set forth at some length in the court's prior memorandum of March 27, 1975, which denied defendant's motion for summary judgment, substantially narrowed the factual issues for trial, and granted in part plaintiffs' motion to amend their complaint. 398 F. Supp. 1047. There is no dispute that the franchise agreements, whose alleged bad faith breach by defendant forms the basis of this action, provide for arbitration by a panel of three arbitrators of "any controversy or claim arising out of, in connection with, or relating to [the respective franchise agreements] or the breach or performance thereof . . . ."[1] Defendant claims that these agreements to arbitrate are within the scope of the Federal Arbitration Act, 9 U.S.C. § 1 et seq., as contracts "evidencing a transaction involving commerce" within the meaning of 9 U.S.C. § 2. Relying on Conley v. San Carlo Opera Co., 163 F.2d 310 (2 Cir. 1947), and defendant's prior allegedly inconsistent position in Weight Watchers of Philadelphia, Inc. v. Weight Watchers International, Inc., 53 F.R.D. 647 (E.D.N.Y.), plaintiffs suggest the claims are not arbitrable. The court cannot subscribe to plaintiffs' view, which in any event, was not strongly pressed. Even they acknowledge that the term "commerce," as used in the Federal Arbitration Act, is broadly construed. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401-02 n. 7, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967). And the Second Circuit's earlier construction in San Carlo has been limited strictly to its facts, if not entirely vitiated in light of Prima Paint. Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1068-69 (2 Cir. 1972). Here, the arbitration provisions are within contracts which, as is clear from the court's review of the summary judgment motion, evidence extensive commercial dealings between the parties across international boundaries, including, inter alia, the granting of franchises by a New York corporation to foreign corporations, to be exercised in the foreign jurisdiction. That is sufficient to fall within the definition "commerce among the several States or with foreign nations" used in 9 U.S.C. § 1, also the definition of "commerce" for purposes of 9 U.S.C. § 2. Prima Paint Corp. v. Flood & Conklin Mfg. Co., supra. See Bigge Crane & Rigging Co. v. Docutel Corporation, 371 F. Supp. 240, 243 (E.D.N.Y.1973); Batson Yarn and Fabrics Machinery Group, Inc. v. Saurer-Allma GmbH-Allgauer Maschinenbau, 311 F. Supp. 68, 70 (D.S.C.1970). II. The more seriously contested issue here is waiver. Both sides acknowledge that the contractual right to arbitrate can be waived. Demsey & Associates v. S. S. Sea Star, 461 F.2d 1009, 1017 (2 Cir. 1972); Cornell & Company v. Barber & Ross Company, 123 U.S. App.D.C. 378, 360 F.2d 512, 513 (1966). Since there is a strong federal policy favoring arbitration, id., a waiver "is not to be lightly inferred, and mere delay in seeking a stay of the proceedings without 1059 some resultant prejudice to a party . . . cannot carry the day." Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 (2 Cir. 1968) (citation and footnotes omitted); Liggett & Myers Incorporated v. Bloomfield, 380 F. Supp. 1044, 1047 (S.D.N.Y.1974). And where, as here, the issue of waiver turns on the significance of actions taken in a judicial forum, the issue is one for the court, rather than the arbitrator, to decide. See In re Tsakalotos Navigation Corp., 259 F. Supp. 210, 213 (S.D.N.Y. 1966). General formulations of what constitutes a waiver in a particular case are of limited usefulness, as the decision normally turns not on some mechanical act but on all the facts of the case. Carolina Throwing Company v. S & E Novelty Corporation, 442 F.2d 329, 330-31 (4 Cir. 1971); Burton-Dixie Corporation v. Timothy McCarthy Construction Company, 436 F.2d 405, 408 (5 Cir. 1971). The factors upon which the waiver question appears to have turned most frequently against the party seeking to compel arbitration are his dilatory conduct in seeking arbitration,[2] usually coupled with his gaining of an undue advantage in the judicial forum or other substantial prejudice to the opposing party,[3] or any other actions taken by the moving party which are sufficiently inconsistent with his seeking arbitration.[4] Examining the circumstances of a particular case, it is usually the absence of one or more of these factors that forms the basis for concluding there has been no waiver.[5] 1060 In concluding that a waiver has occurred in this case, the court finds delay, prejudice and inconsistency all to be present. The procedural history of this case began with the filing of a complaint in July 1973, and the answer within six weeks thereafter, making no reference to arbitration. About four months later plaintiffs initiated discovery with a request for production of documents. Defendants did not comply with the request but instead moved for summary judgment on the merits in February 1974. That motion, along with plaintiffs' subsequently filed motion to amend the complaint, was orally argued in April 1974, but again no reference was then made to the arbitration provisions by either party. The summary judgment motion raised novel and complicated issues which required the court to explore the facts of the case sub judice at length in its effort to sort out legal issues and standards from the dealings of the parties. In the end, defendant failed to obtain the sought-after judgment on the merits. On plaintiffs' motion to amend, no new claims were allowed to be pleaded over defendant's objection; but plaintiffs were permitted to restate, in what the court thought to be a clearer and more orderly fashion, the claims arising out of the matters already pleaded and dealt with in the summary judgment motion. Following the court's decision, the amended complaint was filed in May 1975 and this motion to compel arbitration was brought on by order to show cause in June. Defendant's submission of its summary judgment motion, coupled with its silence on the arbitration issue for nearly two years from the institution of the action, must be viewed as an unequivocal expression of intent to seek a judicial determination of the merits of this action rather than arbitration. Defendant seeks to avoid such an inference by suggesting it "moved to dismiss because it failed to understand any basis for a cause of action whatever . . . ."[6] But defendant did not move to dismiss for failure to state a claim upon which relief could be granted, Rule 12(b)(6), F.R.Civ.P., nor did it move prior to answer for a more definite statement, Rule 12(e), F.R.Civ.P.; instead it joined issue, and, upon affidavits, moved for summary judgment. The court cannot accept the contention, therefore, that defendant was merely seeking to clarify what this lawsuit was all about, despite the fact that the motion may have had that effect. Moreover, there is no possibility or suggestion that defendant, as a franchisor who closely supervises its franchisees with contractual controls, 1061 was unaware of the agreement to arbitrate contractual disputes. Nor is there any reason, aside from vagueness objections, to doubt that a demand to arbitrate was anything other than a logical and obvious response to the original complaint had defendant at that time truly wished a nonjudicial resolution. The broad language in the franchise agreements, coupled with the strong federal policy favoring arbitration, and the absence of any express exclusions from the agreement to arbitrate would almost certainly have required the court to grant a stay and order arbitration had such relief been promptly sought. See, e. g., United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 584-85, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960). Nor is this the sort of case where the complaint clearly raised additional, non-contractual issues that might have caused considerable doubt about defendant's right to seek arbitration on the contract claims in the first instance. See, e. g., Varo v. Comprehensive Designers, Inc., 504 F.2d 1103 (9 Cir. 1974). Plaintiffs also complain of prejudice growing out of defendant's delay. The voluminously documented defense of the summary judgment motion undoubtedly was, as they suggest, costly and, under the circumstances, necessary to withstand defendant's attack one which it is claimed could not have been made in arbitration. The delay occasioned by defendant's motion is itself less clearly prejudicial. Resolution of the motion has materially advanced the litigation during a period in which, due to the court's calendar congestion, a trial date would have been unavailable in any event. But discovery has no doubt been delayed, and an eventual trial date may be further in the future than it might otherwise have been. Then again, ordering arbitration even at this point might materially advance the date of a decision on the merits. Finally, plaintiffs suggest that they will be prejudiced by an arbitration order as it would deny them appellate review of this court's decision delineating the scope of defendant's contractual obligations to plaintiffs concerning the institution and maintenance of legal proceedings to protect plaintiffs from trademark infringement. While the court has no occasion to reconsider and in fact adheres to its views on that question, plaintiffs are likely correct in their assessment that they have little to lose and perhaps much to gain by appellate review of the court's construction of the franchise agreements. Had defendant sought arbitration promptly, plaintiffs could not have been placed in a position where they thought such appellate review was necessary. In sum, the court is satisfied that the elements of delay, prejudice and inconsistent action are too great in this case to avoid a finding of waiver. In particular, the court has not been pointed to and has found no authority for the proposition that one who answers, seeks summary judgment, and awaits the decision on such a motion to present the question of arbitration for the first time may then compel arbitration.[7] Nor do we think that the filing of an amended complaint, which added no new causes of action, materially alters the situation, despite *1062 the opportunity it has afforded defendant to plead anew.[8] Accordingly, defendant's motion must be, and hereby is, in all respects denied. So ordered. NOTES [1] Agreement of July 23, 1969 between Weight Watchers International, Inc. and Weight Watchers of Manitoba, Ltd., Sec. 9.1 at 6-7, Agreement of June 22, 1972 between Weight Watchers International, Inc. and Weight Watchers of Quebec, Ltd., Sec. 8.1 at 30. [2] American Locomotive Co. v. Gyro Process Co., 185 F.2d 316, 318-19 (6 Cir. 1950); Radiator Specialty Co. v. Cannon Mills, 97 F.2d 318 (4 Cir. 1938); La Nacional Platanera, S.C.L. v. North American Fruit & Steamship Corporation, 84 F.2d 881 (5 Cir. 1936); Liggett & Myers Incorporated v. Bloomfield, supra, 380 F.Supp. at 1047-48; United Nations Children's Fund v. S/S Nordstern, 251 F. Supp. 833, 840 (S.D.N. Y.1966); Sucrest Corporation v. Chimo Shipping Limited, 236 F. Supp. 229 (S.D.N. Y.1964). [3] Demsey & Associates v. S. S. Sea Star, supra, 461 F.2d at 1018; Liggett & Myers Incorporated v. Bloomfield, supra. [4] Gutor International AG v. Raymond Packer Co., Inc., 493 F.2d 938, 945 (1 Cir. 1974); Burton-Dixie Corporation v. Timothy McCarthy Construction Company, supra, 436 F.2d at 408-09; Cornell & Company v. Barber & Ross Company, supra; E. I. du Pont de Nemours & Company v. Lyles & Lang Construction Company, 219 F.2d 328, 334 (4 Cir.) (dictum), cert. denied, 349 U.S. 956, 75 S. Ct. 882, 99 L. Ed. 1280 (1955); American Locomotive Co. v. Gyro Process Co., supra; American Locomotive Co. v. Chemical Research Corporation, 171 F.2d 115, 121-22 (6 Cir. 1948); cert. denied, 336 U.S. 909, 69 S. Ct. 515, 93 L. Ed. 1074 (1949); Galion Iron Works & Mfg. Co. v. J. D. Adams Mfg. Co., 128 F.2d 411, 413 (7 Cir. 1942); Radiator Specialty Co. v. Cannon Mills, supra; La Nacional Platanera, S.C.L. v. North American Fruit & Steamship Corporation, supra; Liggett & Myers Incorporated v. Bloomfield, supra; Graig Shipping Co. v. Midland Overseas Shipping Corporation, 259 F. Supp. 929 (S.D.N.Y.1966); United Nations Children's Fund v. S/S Nordstern, supra; Instituto Cubano de Establizacion Del Azucar v. The S/S Rodestar, 143 F. Supp. 599 (S.D.N.Y.1956); Cargo Carriers v. Erie & St. Lawrence Corp., 105 F. Supp. 638 (W. D.N.Y.1952); The Belize, 25 F. Supp. 663 (S.D.N.Y.1938), appeal dismissed, 101 F.2d 1005 (2 Cir. 1939). [5] See Erving v. Virginia Squires Basketball Club, supra, 468 F.2d at 1068; ITT World Communications, Inc. v. Communications Workers of America, AFL-CIO, 422 F.2d 77, 82-83 (2 Cir. 1970); Carcich v. Rederi A/B Nordie, supra, 389 F.2d at 696; Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F.2d 402, 412-13, (2 Cir. 1959), cert. granted, 362 U.S. 909, 80 S. Ct. 682, 4 L. Ed. 2d 618, dismissed under Rule 60, 364 U.S. 801, 81 S. Ct. 27, 5 L. Ed. 2d 37 (1960); Almacenes Fernandez, S. A. v. Golodetz, 148 F.2d 625, 627-28 (2 Cir. 1945); Kulukundis Shipping Co., S/A v. Amtorg Trading Corporation, 126 F.2d 978, 989-91 (2 Cir. 1942); Germany v. River Terminal Railway Company, 477 F.2d 546 (6 Cir. 1973); Howard Hill, Inc. v. George A. Fuller Company, Inc., 473 F.2d 217 (5 Cir. 1973); Hart v. Orion Insurance Company, 453 F.2d 1358, 1360-61 (10 Cir. 1971); Carolina Throwing Company v. S & E Novelty Corporation, supra; General Guaranty Insurance Company v. New Orleans General Agency, Inc., 427 F.2d 924 (5 Cir. 1970); Hilti, Inc. v. Oldach, 392 F.2d 368 (1 Cir. 1968); Reynolds Jamaica Mines v. La Societe Navale Caennaise, 239 F.2d 689, 692-93 (4 Cir. 1956); Macchiavelli v. Shearson, Hammill & Co., Incorporated, 384 F. Supp. 21, 26 (E.D.Cal.1974); Bigge Crane & Rigging Co. v. Docutel Corporation, supra, 371 F.Supp. at 244; Milton Schwartz & Associates, Architects v. Magness Corporation, 368 F. Supp. 749 (D.Del.1974); Batson Yarn and Fabrics Machinery Group, Inc. v. Saurer-Allma GmbH-Allgauer Maschinenbau, supra, 311 F.Supp. at 72-74; G. B. Michael v. SS Thanasis, 311 F. Supp. 170, 181-82 (N. D.Cal.1970); Commercial Metals Company v. International Union Marine Corporation, 294 F. Supp. 570, 573-74 (S.D.N.Y.1968); Mason v. Stevensville Golf and Country Club, Inc., 292 F. Supp. 348 (S.D.N.Y.1968); Lumbermens Mutual Casualty Company v. Borden Company, 268 F. Supp. 303, 311-13 (S.D.N.Y.1967); Necchi Sewing Machine Sales Corp. v. Carl, 260 F. Supp. 665, 667-69 (S.D.N.Y.1966); In re Tsakalotos Navigation Corp., supra, 259 F.Supp. at 212-14; Rootes Motors, Inc. v. Steamship Carina, 1964 A.M.C. 2754 (S.D.N.Y.); Cavac Compania Anonima Venezolana de Administracion y Comercio v. Board for Validation of German Bonds in United States, 189 F. Supp. 205, 208-10 (S.D.N.Y.1960); McElwee-Courbis Construction Co. v. Rife, 133 F. Supp. 790, 795 (M.D.Pa.1955); Harris Hub Bed & Spring Co. v. United Electrical, Radio & Machine Workers of America (U.E.), 121 F. Supp. 40, 42 (M.D.Pa.1954); Richard Nathan Corp. v. Diacon-Zadeh, 101 F. Supp. 428 (S.D.N.Y.1951). [6] Def. Reply Memo. at 3. [7] ITT World Communications, Inc. v. Communications Workers of America, AFL-CIO, supra, cited by defendant, is not on "all fours" with this case. There an answer had been filed and only a four-month delay ensued in seeking arbitration, during which plaintiff moved for summary judgment and defendant moved for a stay pending arbitration. The court found no waiver, as plaintiff "made no showing of prejudice resulting from the delay." Id. at 83. Here, there is prejudice, a much longer delay, and unlike ITT, the party seeking summary judgment and arbitration are one and the same. A review of the other cases cited by defendant, included in n. 5 supra, reveals them all to be inapposite for similar reasons. [8] The general statement in Chatham Shipping Company v. Fertex Steamship Corporation, 352 F.2d 291, 293 (2 Cir. 1965), to the effect that the earliest point defendant's waiver may be found is when it files an answer on the merits, does not alter this conclusion. That rule does not allow defendant to assert, for the first time in response to an amended complaint raising no new claims, a demand not raised in the original answer and otherwise totally at odds with its actions in the lawsuit. The court also finds distinguishable Matter of Haupt v. Rose, 265 N.Y. 108, 191 N.E. 853 (1934), cited by defendant. Aside from the fact that federal law controls the waiver issue, see Coenen v. R. W. Pressprich & Co., 453 F.2d 1209, 1211 (2 Cir.), cert. denied, 406 U.S. 949, 92 S. Ct. 2045, 32 L. Ed. 2d 337 (1972), in Haupt defendant's arbitration demand was made within three months of the filing of the complaint, after defendant's motion to dismiss was denied, but either before or as part of the responsive pleading to an amended complaint. The court found neither such delay or unequivocal action by defendant as would constitute an election and waiver. 265 N.Y. at 110, 191 N.E. 853. Haupt may not be read as providing a defendant carte blanche to raise new matters in response to an amended complaint that states no new causes of action.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1516268/	955 F. Supp. 1066 (1997) ARCHDIOCESE OF MILWAUKEE, Holy Name Catholic Church, St. Francis Desales Catholic Church, St. Patrick Catholic Church, St. Peter Claver Parish, St. James Catholic Church, and Holy Cross Parish, Plaintiffs, v. UNDERWRITERS AT LLOYD'S, LONDON; Dominion Insurance Co.; CNA Reinsurance of London Ltd.; Stronghold Insurance Co., Excess Insurance Co., Yasuda Fire and Marine Insurance Co.; Terra Nova Co.; St. Katherine Insurance Co.; Sphere Drake Insurance Co. PLC; Interstate Fire & Casualty Co.; Centennial Insurance Co.; International Surplus Lines Insurance Co.; Granite State Insurance Co., and National Union Fire Insurance Co., Defendants. Civil Action No. 95-C-0088. United States District Court, E.D. Wisconsin. February 28, 1997. 1067 Matthew J. Flynn, Quarles & Brady, Milwaukee, WI, For Plaintiffs Archdiocese of Milwaukee, Holy Name Catholic Church, St. Francis DeSales Catholic Church, St. Patrick Catholic Church, St. Peter Claver Parish, St. James Catholic Church, and Holy Cross Parish. Maureen A. McGinnity, Foley & Lardner, Milwaukee, WI, and Catalina J. Sugayan, Lord, Bissell & Brook, Chicago, IL, For Defendants Underwriters at Lloyds of London, Dominion Ins. Co., CNA ReIns. of London, Ltd., Stronghold Ins. Co., Excess Ins. Co., Yasuda Fire & Marine Ins. Co. of America, Terra Nova Co., St. Katherine Ins. Co., and Sphere Drake Ins. Co. Randy Sue Schreiber, Querrey & Harrow, Chicago, IL, and Timothy J. McNamara, Onedane, Donohoe, Bernard, Torian, Diaza, McNamara & Abell, Lafayette, LA, For Defendant Interstate Fire & Cas. Co. Lisa M. Kouba, Clausen, Miller, Gorman, Caffrey & Witous, Chicago, IL, and Donald P. O'Meara, Mitchell, Baxter, O'Meara & Mathie, s.c., Milwaukee, WI, For Defendants Centennial Ins. Co., and National Union Fire Ins. Co. D. Timothy McVey, Purcell & Wardrope, Chicago, IL, For Defendant Int'l Surplus Lines Ins. Co. Charles H. Bohl, Whyte Hirschboeck Dudek, S.C., Milwaukee, WI, and Tamara A. Hayes, Whyte, Hirschboeck & Dudek, Menomonee Falls, WI, For Defendant Granite State Ins. DECISION AND ORDER ADOPTING MAGISTRATE'S RECOMMENDATION REYNOLDS, District Judge. A contract term, has kept this case in a state of jurisdictional limbo for over two years. The defendants want this insurance coverage dispute litigated in federal court, and the plaintiffs want the case remanded to state court. Although the defendants would normally have a right to a federal forum, the relevant contract clause states: "the Insurers, at the request of the insured (or reinsured), will submit to the jurisdiction of any Court of competent jurisdiction within the United States." (Pls.' Resp. to Defs.' Objections to Magistrate's Mem. & Order, Ex. 1 (Schneider Aff.), Ex. A.) If that language waives the right to remove a case, this case belongs back in Milwaukee County Circuit Court. The clause justifies the rule that a court interprets any ambiguities against the insurer. Had the clause stated "the Insurers waive any defenses based on personal jurisdiction or service of process," as the defendants say it means, the removal issue would have been clear, and the case could have been finished by now. At best, the clause is ambiguous, and the plaintiffs win; at worst, the defendants' interpretation makes one part of the clause superfluous and contradicts another part of the contract. Although drafters of contracts prefer old, vague, awkward phrasing that courts have interpreted, the interpretation of similar clauses favors the plaintiffs. The court agrees with Magistrate Judge Gorence's April 23, 1996 Memorandum and Order, and will remand the case. 1068 Generally, the court would review the magistrate's decision only for clear error because a motion to remand is not a dispositive motion as defined by Fed.R.Civ.P. 72(b). Because the parties have implicitly treated the court's review as de novo and because the court would come to the same conclusion under either standard, it will proceed with a de novo review. The plaintiffs filed this insurance coverage dispute in Milwaukee County Circuit Court on December 23, 1994. On January 25, 1995, the defendants removed the case to federal court. On February 25, 1995, the plaintiffs moved to remand this case to state court. On May 7, 1996, Magistrate Judge Gorence issued an order granting the motion to remand, which the defendants appealed. The parties dispute whether the following clause waives the defendants' right to remove a case to federal court: [I]n the event of the failure of the Insurers to pay any amount claimed to be due hereunder, the Insurers, at the request of the insured (or reinsured), will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court. (Schneider Aff.Ex. A.) The plaintiffs argue that defendants agreed to submit to the jurisdiction of the court that plaintiffs choose. The defendants argue that they merely agree to accept service of the complaint and to waive a defense based upon the lack of personal jurisdiction. "At the request of the insured" supports both parties' interpretations. Implicit in the defendants' view, the plaintiffs are requesting that the parties resolve the dispute about the insurer's obligation to pay. In other words, the clause should say "The Insurers, at the request of the insured (or reinsured) to resolve the insurers' failure to pay, will submit to the jurisdiction of any Court...." Implicit in the plaintiffs' view, they are requesting that the insurers submit the dispute to a specific court. In other words, the clause should say, "The Insurers, at the request of the insured to submit the dispute to the jurisdiction of any Court of competent jurisdiction within the United States, will agree to that request." Because the clause does not identify what "request" means, both interpretations are plausible, and the court must adopt the plaintiffs' interpretation the defendants have agreed to submit to the court of the plaintiffs' choosing. Even if the court did not interpret all ambiguities in the insured's favor, it would reject the defendants' interpretation. First, if the defendants are correct, the phrase "at the request of the insured (or reinsured)" is meaningless. The clause would have the same meaning if it said "the Insurer will submit to the jurisdiction of any Court of competent jurisdiction...." Courts try to avoid making phrases superfluous. Second, the defendants' interpretation contradicts the phrase requiring them to "submit to the jurisdiction of any Court ... and comply with all requirements necessary to give such Court jurisdiction...." Because the clause does not specify personal jurisdiction, it means either personal jurisdiction or subject matter jurisdiction. Removal, however, allows a party to deny one court subject matter jurisdiction in favor of another. By removing the case from Milwaukee County Circuit Court to federal court, the insurers denied the Milwaukee County Circuit Court the authority to determine the merits of the case. Because the insurers must comply with all requirements necessary to give "such Court"[1] jurisdiction, the insurers could not remove the case. 1069 Third, cases interpreting similar language also reject the defendants' position. As Magistrate Judge Gorence noted, and as the defendants accept, every court has held that this type of clause prevents an insurer from removing the case to federal court. (See Apr. 23, 1996 Memorandum and Order at 5-6 (citing cases).) In response, the defendants rely on cases in which courts granted an insurer's motion to dismiss for forum non conveniens. See May 7, 1996 Objection to Magistrate's Memorandum and Order at 3-7 (discussing cases). In granting those motions, many of the cases appear to contradict the reasoning of the remand cases. See Cannelton Indus., Inc. v. Aetna Cas. & Surety Co., 194 W.Va. 186, 460 S.E.2d 1, 12-13 (1994); W.R. Grace & Co. v. Hartford Accident and Indem. Co., 407 Mass. 572, 555 N.E.2d 214, 218-19 (1990). Only one, however, directly criticized the remand cases. See Whirlpool Corp. v. Certain Underwriters at Lloyd's London, 278 Ill.App.3d 175, 214 Ill. Dec. 901, 905, 662 N.E.2d 467, 471 (1996). Because the defendants see no difference between remand and dismissal for forum non conveniens, they ask the court to follow the latter cases. The difference between remand and forum non conveniens is the difference between a purely private interest and a public interest; therefore, the forum non conveniens cases have no application to a remand case. The defendants' right to remove a case is their right alone. They can waive it, exercise it, or bargain it away. The court and the public have no interest in what the defendants do with their right to remove. On the contrary, forum non conveniens deals with where a case should be tried based on the interests of both the parties and the public. Regardless of what a party bargains away, it may not waive the public's interest; the court must still weigh the public interest involved. See Appalachian Ins. Co. v. Union Carbide Corp., 162 Cal. App. 3d 427, 208 Cal. Rptr. 627, 633 (1984). Many of the forum non conveniens cases take this position. See id. 208 Cal.Rptr. at 634. In W.R. Grace, the court granted a motion to dismiss for forum non conveniens, but it refused to consider the insured's private interests in changing the forum because the contract had a clause similar to the one at issue in this case. 555 N.E.2d at 219. The criticisms of the remand cases misinterpret the meaning of the clause and are trapped in semantics. The issue is not whether the clause is a forum selection clause (whether it is or not resolves neither the removal nor the forum non conveniens issues); the issue is whether the defendants have waived their right to remove the plaintiffs' case to federal court. It may be that the defendants can move for a dismissal for forum non conveniens. It may be that the defendants could have filed a declaratory judgment action in federal court first. Compare City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13 (5th Cir.1991) (holding that the clause waived an insurer's right to remove the plaintiff's case) with International Ins. Co. v. McDermott, Inc., 956 F.2d 93, 95, 96 (5th Cir.), cert. denied, 506 U.S. 826, 113 S. Ct. 82, 121 L. Ed. 2d 46 (1992) (holding that the clause did not waive an insurer's right to file a declaratory action in federal court before the plaintiff filed a state court action but explicitly reaffirming Nutmeg). Nevertheless, the defendants waived their right to remove this case to federal court. The plaintiffs challenged Magistrate Judge Gorence's ruling that denied them costs in moving for remand. On this issue, the plaintiffs agree that the court's review is for clear error. Nothing suggests clear error, so the court adopts the magistrate's decision to deny the plaintiffs' costs. CONCLUSION The court ADOPTS Magistrate Judge Gorence's April 23, 1996 Memorandum and Order and ORDERS THE FOLLOWING: 1. The court REMANDS the case to Milwaukee County Circuit Court. 2. The court RESERVES for the Milwaukee County Circuit Court, the motion of 1070 Underwriters at Lloyd's, London to vacate any defaults against CNA Reinsurance of London, Ltd. The court AFFIRMS Magistrate Judge Gorence's decision to deny payment of costs to the plaintiffs. SO ORDERED. MEMORANDUM AND ORDER GORENCE, United States Magistrate Judge. NATURE OF CASE The plaintiffs, the Archdiocese of Milwaukee and six parishes, have filed a motion to remand this case involving an insurance coverage dispute to Milwaukee County Circuit Court. On December 23, 1994, the plaintiffs filed suit in Milwaukee County Circuit Court against 14 insurance companies.[1] The remaining 13 defendants consist of Underwriters at Lloyd's, London (Lloyd's), and eight "London Insurers", along with four American insurance companies.[2] On January 25, 1995, the defendants removed the case to federal court pursuant to 28 U.S.C. § 1441 asserting that this court has original jurisdiction under 28 U.S.C. § 1332. On February 25, 1995, the plaintiffs moved to remand this case to state court. Also pending is defendant Lloyd's motion to vacate any defaults against CNA Reinsurance of London, Ltd. (CNA) and motion to file a surreply. These motions will be addressed herein. This case was assigned according to the random assignment of civil cases pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 13.03 (E.D.Wis.). Because the parties have not consented to magistrate judge jurisdiction, this court now makes its recommended disposition of the pending motions. DEFENDANT UNDERWRITERS AT LLOYD'S, LONDON'S MOTION TO FILE SURREPLY The defendant Lloyd's has moved to file a surreply to the plaintiffs' reply brief in support of their motion for remand on the ground that the plaintiffs have raised an additional issue in that brief. The plaintiffs oppose the motion. Local court rules do not provide for the filing of a surreply brief. Local Rule 6.01 (E.D.Wis.) provides for the filing of a brief in support of a motion, an answering brief, and a reply brief. The rule does not provide for briefs in response to replies, such as the defendant's surreply brief which responds to an "additional issue" in the plaintiff's reply brief. If the defendant's brief is permitted, the plaintiffs may wish to file a reply to defendant's surreply. However, at some point, briefing must end. Accordingly, defendant Lloyd's motion to file a surreply brief will be denied. PLAINTIFFS' MOTION TO REMAND The plaintiffs argue that the case must be remanded because Lloyd's and the London Insurers contractually waived their right to remove and all named defendants have not joined in the removal as required by 28 U.S.C. § 1446. The plaintiffs contend that the defendants Lloyd's and the London Insurers waived any right to removal by agreeing in the insurance contracts with plaintiffs to submit to the jurisdiction of any court of competent jurisdiction which plaintiff selects and to have the controversy determined in accordance with law and practice of that court. The defendants contend that the contract language does not constitute a waiver of any rights to removal and the purpose of the clause is merely to provide consent to service of process. They also assert that removal was proper because CNA, as a nominal defendant, was not required to join in the notice for removal and that CNA did join in the removal notice but was not named on Consent to Removal form due to a clerical error. The dispute between the parties centers around the interpretation of a clause in the insurance contracts entered into by the parties. 1071 The policies issued by defendants Lloyd's and the London Insurers contain the following applicable provisions:[3] It is agreed that in the event of the failure to pay any amounts claimed to be due hereunder, the Insurers, at the request of the insured (or reinsured), will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice in such Court. It is further agreed that service of process in such suit may be made upon Lord, Bissell & Brook, 115 South LaSalle Street, Chicago, Illinois 60603, or Mendes & Mount, 3 Park Avenue, New York, New York 10016, or their nominee, and that in any suit instituted against any of them upon this contract, the Insurers will abide by the final decision of such Court or of any Appellate Court in the event of an appeal. The above-named are authorized and directed to accept service of process on behalf of the Insurers in any such suit and/or upon the request of the insured (or reinsured) to give a written undertaking to the insured (or reinsured) that they will enter a general appearance upon the Insurer's behalf in the event such a suit shall be instituted. The plaintiffs characterize this provision as a forum selection clause which mandates that all disputes arising from non-payment to the insured plaintiffs be litigated in the forum chosen by the plaintiffs. On the other hand, the defendants assert it is a service of suit clause. A review of the relevant policy provisions shows that the defendant insurers agreed to litigate disputes under the policy in any court of competent jurisdiction selected by the plaintiff-insureds. The defendants, Lloyd's and the London Insurers, which drafted the policies, included the language, "at the request of the Insured" and agreed to "submit to the jurisdiction of any court of competent jurisdiction" and to "comply with all requirements necessary to give such court jurisdiction." The defendants also agreed to having matters "determined in accordance with the law and practice of such Court." (Emphasis added). The "such Court" is the court of competent jurisdiction selected by the plaintiffs. The defendants' interpretation of the policy provisions would render these provisions mere surplusage. Thus, unless these phrases are considered mere surplusage, the policy provisions provide that the plaintiff-insureds have the right to choose the court of competent jurisdiction to be utilized for resolution of policy disputes. The language in this forum selection clause waived the defendants' right to removal. Forum selection clauses are enforceable and should be controlling "absent a strong showing that it should be set aside." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 1916, 32 L. Ed. 2d 513 (1972). The party challenging the clause must show "that enforcement would be unreasonable or unjust, or that the clause was invalid for reasons of fraud or overreaching." Id. In this case, the defendants have made no showing that the provisions at issue are unreasonable under the standards set forth in M/S Bremen. This construction of the policy provision is supported by a long line of cases where courts interpreting the same or similar language in insurance contracts have held that it constitutes a waiver of the defendant's right to remove. See Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207, 1216-18 (3d Cir.), cert. denied, 502 U.S. 908, 112 S. Ct. 302, 116 L. Ed. 2d 245 (1991); City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13 (5th Cir.), cert. denied, 502 U.S. 908, 112 S. Ct. 301, 116 L. Ed. 2d 244 (1991); Cessna Aircraft Co. v. Fidelity and Casualty Co. of New York, 616 F. Supp. 671, 674-75 (D.N.J.1985); Capital Bank and Trust Co. v. Associated International insurance Co., 576 F. Supp. 1522, 1072 1524-25 (M.D.La.1984); Himes v. Admiral Insurance Co., 575 F. Supp. 312, 313-14 (E.D.Ky.1983); Perini Corporation v. Orion Ins. Co., 331 F. Supp. 453, 455 (E.D.Cal.1971); Lavan Petroleum Co. v. Underwriters at Lloyd's, 334 F. Supp. 1069, 1073 (S.D.N.Y. 1971); Oil Well Service Co. v. Underwriters at Lloyd's, 302 F. Supp. 384, 385 (C.D.Cal. 1969); Euzzino v. London & Edinburgh Ins. Co., 228 F. Supp. 431, 433 (N.D.Ill.1964); General Phoenix Corp. v. Malyon, 88 F. Supp. 502 (S.D.N.Y.1949). Each of these courts determined that by choosing to include this forum selection clause, the defendants effectively waived their right to remove. In Foster, the court held that the same language in the clause in the contract manifested the insurer's consent and willingness to "go to and stay in" the court requested by the insured. 933 F.2d at 1217; see also, Nutmeg, 931 F.2d at 15 (substantially identical service of suit clause gave the insured the right to choose the forum in which to try its claims against the insurer and prohibited the defendant insurer from removing the state court action to federal court); Euzzino, 228 F.Supp. at 433 (the clause "restricts the defendant to the court in which the suit first began against it, be it Federal or State") (citing General Phoenix, 88 F.Supp. at 503). Defendant Lloyd's or one of its affiliated insurers was either named as a defendant or the author of the policy in a number of these cases in which courts held that the clause served as a waiver to the right to remove. See e.g. Cessna, 616 F.Supp. at 671 (Lloyd's named as defendant); Perini, 331 F.Supp. at 455 (Lloyd's authored policy); Lavan, 334 F.Supp. at 1069 (Lloyd's named as defendant); Oil Well Service, 302 F.Supp. at 384 (Lloyd's named as defendant). The defendants rely on three cases in which virtually the same language was construed in favor of the insurer. However, these cases are clearly distinguishable. In McDermott International, Inc. v. Lloyd's Underwriters of London, 944 F.2d 1199 (5th Cir.1991) the court found ambiguity in the contract which contained two coequal forum selection clauses an arbitration clause and a service-of-suit clause. Under the facts of the case, the court concluded that the policy did not unambiguously give the insured the right to choose which forum would decide arbitrability of policy disputes or waive the insurer's removal rights. In the instant case, the arbitrability of policy disputes is not an issue. The issue is simply whether the defendants properly failed to pay the claims. In re Delta America Re Ins. Co., 900 F.2d 890 (6th Cir.), cert. denied, 498 U.S. 890, 111 S. Ct. 233, 112 L. Ed. 2d 193 (1990) is equally unavailing to the defendants. In Delta, the defendant, a commercial bank branch of a foreign sovereign, removed a state court action pursuant to 28 U.S.C. § 1441(d), a part of the Foreign Sovereign Immunities Act (FSIA), which gives foreign sovereigns the right to remove actions brought against them in state court. The court found that the language in the contract clause did not clearly and unequivocally evidence an intent to waive the right to removal. However, the court acknowledged that its finding was bolstered by the language and purpose of § 1441(d) which granted the right of removal to foreign sovereigns and thus allowed them to avoid "any local bias or prejudices possibly inherent in state court proceedings and also to avoid trial by jury." Id. at 893. Therefore, Delta is not persuasive where as here there are no considerations involving the FSIA. In Regis Associates v. Rank Hotels (Management) Ltd., 894 F.2d 193, 194 (6th Cir. 1990), the clause at issue merely stated that the "parties hereby submit to the jurisdiction of the Michigan Courts." The clause did not provide that the insured could select the forum in which to litigate any disputes or require the defendant to abide by the decision of such court. The court found that the language in the clause did not waive the right of removal from state court to federal court in Michigan. In light of the foregoing, the court concludes that by including the forum selection clause in the agreements with the plaintiffs, the defendants effectively waived their right to remove any subsequent dispute under the contract to federal court. Defendants Lloyd's and the London Insurers agreed to litigate this matter in any court of competent *1073 jurisdiction selected by the plaintiffs. The plaintiffs selected the Milwaukee County Circuit Court. The issue of contractual waiver is dispositive of the plaintiffs' motion to remand. Therefore, the issue concerning whether CNA failed to join in the removal is moot. Accordingly, the plaintiffs' motion to remand will be granted. OTHER MATTERS The plaintiffs also request that this court award it attorney's fees under 28 U.S.C. § 1447(c). Section 1447(c) provides that "[a]n order remanding the case may require payment of just costs and any actual expenses, including attorneys fees, incurred as a result of the removal." While this court has determined that the clause at issue is a forum selection clause, defendants' position on removal was not without basis in existing case law. Therefore, after due consideration and in the exercise of its discretion, the court denies the plaintiffs' request for attorney's fees. Finally, this court will not resolve the motion of defendant Lloyd's to vacate any defaults against CNA. Resolution of that motion will be reserved for the state circuit court to which this matter is being remanded. ORDER NOW THEREFORE, IT IS ORDERED that the plaintiff's motion to remand be and hereby is GRANTED. IT IS ALSO ORDERED that the motion of Underwriter at Lloyd's, London to vacate any defaults against CNA Reinsurance of London, Ltd be and hereby is RESERVED for the Milwaukee County Circuit Court. IT IS ALSO ORDERED that the motion of defendant Underwriter of Lloyd's, London to file a surreply be and hereby is DENIED. Your attention is directed to 28 U.S.C. § 636(b)(1)(A) and Local Rule 13.02 (E.D.Wis.), whereby written appeal from any order herein or part thereof may be filed with the clerk of court within ten days hereof. Failure to appeal to the district court shall result in a waiver of your right to appeal. Dated at Milwaukee, Wisconsin this 23rd day of April, 1996. NOTES [1] The use of "such Court" also undermines the defendants' interpretation. "Such" is a definite adjective, referring to a specific court; however, the clause mentions no specific court. If the court equates "such court" with "any court," the defendants have agreed to do whatever is necessary to give any court jurisdiction. The vagueness of "request" suggest an interpretation more detrimental to the defendants. "Request" summons up images of a formal, engraved invitation, which has nothing to do with the reality of litigation. Rather, the plaintiffs made their request by filing a civil complaint in a specific court. If the court were to interpret "such Court" as a specific court, the only possible court is the one in which the complaint ("the request") was filed. So, the defendants agreed to submit to the jurisdiction of the court in which the complaint was filed. [1] Originally there were 14 named defendants but one defendant, National Union Fire Insurance Company, was voluntarily dismissed prior to the removal of this case to federal court. [2] The London Insurers are insurers associated with Underwriters at Lloyd's, London, to provide surplus lines coverage under Wis Stat § 618.41. [3] The record does not contain the contract provisions involving the remaining defendants and the plaintiffs.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2664076/	UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA §@Z§;.,§B ) .BLL - ? erisa KEITHRUSSELLJUDD, > :;Si,.@'z‘.';:;§§:%‘:,'.:::;za Plaintiff, § v. § Civil Action No. 10-0837 (PLF) FEDERAL COMMUNICATIONS COMMISSION § and FEDERAL ELECTION COMMISSION, ) Defendants. § ) OPINION This matter is before the Court on (l) the motion of pro se plaintiff Keith Russell Judd for a default judgment; (2) the motions of the Federal Communications Commission ("FCC") and the F ederal Election Commission ("FEC") to set aside the entry of default; and (3) the motion of the FCC for imposition of filing restrictions against Mr. Judd.' Upon consideration of the parties’ papers, the relevant legal authorities, and the entire record in this case, the Court will deny Mr. Judd’s motion for default judgment, will grant the FCC’s and the FEC’s motions to set aside the entry of default, will grant the FCC’s motion for imposition of filing restrictions against Mr. Judd, and will dismiss Mr. Judd’s complaint without prejudice for 1 For convenience and for consistency with the parties’ papers, the Court will refer to the FCC and the FEC together as the "defendants," even though, as discussed below, Mr. Judd’s only claim against the FEC was dismissed by the Court on July l6, 2()10. The FEC therefore is no longer a defendant in this case. failure to effect proper service of process pursuant to Rule 4(m) of the Federal Rules of Civil Procedure. With one exception, all other pending motions will be denied as moot.z I. BACKGROUND Plaintiff Keith Russell Judd currently is incarcerated in federal prison in Beaumont, Texas, having been "convicted by a jury of two counts of mailing a threatening communication with the intent to extort money or something of value and . . . sentenced to 2l0 months of imprisonment." United States v. Judd, No. 02-50750, 77 Fed. App’x 728, 2003 WL 223403061, at l (5th Cir. Oct. 7, 2003). Since he began serving his sentence in 1999, he has become a prolific but unsuccessful pro se litigant. &, e_.g_., Judd v. FCC, 723 F. Supp. 2d 221 , 223 n.2. (D.D.C. 20l0). Mr. Judd’s legal complaints have been so numerous and so lacking in merit that he now is barred, except in extraordinary circumstances, from filing new 2 The papers reviewed in connection with the pending motions include: Mr. Judd’s emergency elections complaint for declaratory judgment, injunction and damages ("Compl.") [Dkt. No. l]; Mr. Judd’s affidavits in support of default ("Judd Affs.") [Dkt. No. 36]; the entry of default ("Entry of Default") [Dkt. No. 37]; Mr. Judd’s motion for default judgment ("Judd Mot.") [Dkt. No. 38]; the FCC’s motion to set aside entry of default and in opposition to the motion for default judgment and notice for demand for judgment ("FCC Mot.") [Dkt. No. 44]; the FEC’s motion to set aside entry of default and brief in support thereof ("FEC Mot.") [Dkt. No. 51]; Mr. Judd’s response to the FCC’s and FEC’s motion to set aside the entry of default and reply to the opposition to the motion for default judgment and demand for judgment ("Judd Opp. and Reply") [Dkt. No. 54]; Mr. Judd’s motion to strike the govemment’s motion to set aside the entry of default ("Judd Mot. Strike") [Dkt. No. 59]; the FCC’s reply memorandum in support of its motion to set aside an entry of default ("FCC Reply") [Dkt. No. 58]; Mr. Judd’s motion for the Court to allow his pleadings, motions, and papers to be served on the defendants using the Court’s electronic service ("Judd Mot. Service") [Dkt. No. 60]; the FCC’s motion for imposition of filing restrictions against Mr. Judd and memorandum in support thereof ("FCC Mot. for Restrictions") [Dkt. No. 78]; Mr. Judd’s response and supplemental response to the FCC’s motion for imposition of filing restrictions ("Judd Opp. to Mot. for Restrictions"; “Judd Supp. Opp. to Mot. for Restrictions") [Dkt. Nos. 80, 85]; and the FCC’s reply in support of its motion to impose filing restrictions against Mr. Judd ("FCC Restrictions Reply") [Dkt. No. 90]. 2 lawsuits while in prison without first paying the full amount of any filing fee. § Judd v. FEC, Civi1Action No. 08-1290, 2008 WL 2901643, at 1 (D.D.C. July 28, 2010). On April 8, 2008, Mr. Judd filed a pro se complaint against the FCC and the FEC in which he makes seven claims for relief and requests that the Court empanel a three-judge court. §Qe_ Compl. at 1-2.3 "Numerous of these claims are requests for the Court to declare various statutes constitutional and order that they be enforced, or to declare various statutes unconstitutional." Judd v. FCC, 723 F. Supp. 2d at 223. On July 16, 2010, this Court issued a Memorandum Opinion and Order in which, among other things, it dismissed as frivolous five of Mr. Judd’s seven claims for relief and denied Mr. Judd’s request that the Court empanel a three-judge court. §§ Judd v. FCC, 723 F. Supp. 2d at 225.4 That decision effectively dismissed the FEC as a defendant in this case (although the Order did not so specify), because Mr. Judd’s only remaining claims _ Counts 2 and 3 _ were made only against the FCC. The Court did not dismiss those two claims because, "[a]lthough plaintiffs allegations are minimal, . . . it appears that he made a [Freedom of information Act] and/or Privacy Act request to the FCC, and that the FCC’s response to that request or requests may be ripe for judicial review." M. at 224. Thus, the Court concluded that "plaintiff’s claims under the FOIA and Privacy Act are not frivolous[.]" ld. at 224. 3 Mr. Judd "origina11y filed his complaint in the United States District Court for the Eastem District of Texas. lt was transferred to this Court on May 20, 2010, because venue did not lie in the district in which it was filed." Judd v. FCC, 723 F. Supp. 2d at 222 n.l. 4 On March 21, 2011, the Court issued a Memorandum Opinion and Order denying Mr. Judd’s motion for reconsideration of the Court’s July 16, 2010 decision. § Memorandum Opinion and Order at 1, Mar. 21, 2011. Before Mr. Judd could proceed on his two remaining claims, however, the Court brought to his attention a threshold issue with respect to service of process. S_ee_ Judd v. FCC, 723 F. Supp. 2d at 224-25. The Court stated: [N]o affidavit proving service as required by Rule 4(/) of the Federal Rules of Civil Procedure appears in the Court’s docket for this case. In the complaint, plaintiff states "under penalty of perjury" that he "mailed" the complaint to the agency defendants and to the United States District Court in Beaumont, Texas. § Compl. at 3. It does not appear, however, that in attempting service plaintiff has fully complied with Rule 4(i) of the Federal Rules of Civil Procedure, which requires that to serve an agency of the United States, plaintiff must send a copy of the summons and of the complaint by registered 0r certified mail to the agency as well as by serving the United States in its own right. E. at 224-25 (emphasis in original). The Court granted Mr. Judd "additional time to effect and prove service," but expressly made clear that "[h]e must provide an affidavit of proper service or show cause why the case should not be dismissed for failure to serve defendants by November 16, 2010." E. at 225. Thus, the Court’s July 16, 2010 Memorandum Opinion and Order put Mr. Judd on actual notice as to the possibility that his case may be dismissed for failure to effect and prove service. _S_@ Brown v. District of Columbia, 514 F.3d 1279, 1286 (D.C. Cir. 2008) (A suit may be dismissed for failure to effect service only if a plaintiff is first given actual or constructive notice as to the impending dismissal. "This rule is especially important to a plaintiff who is pro se and incarcerated[.]"). Presumably in response to the Court’s July 16, 2010 Memorandum Opinion and Order, on October 15, 2010, Mr. Judd filed five affidavits in support of default. § Judd Affs. at 1-5. There, he certified "under penalty of perjury" that, on May 11, 2008, he "served via registered or certified mail" the U.S. Attomey in Beaumont, Texas; and that, on May 12, 2008, he "served via registered or certified mail" the U.S. Attomey in Washington, D.C., the FCC, the FEC, and the Attorney General. § Judd Affs. at 1-5. Mr. Judd did not specify whether this purported service included the required summons and complaint, and he included no other proof of such purported service. After Mr. Judd filed his affidavits in support of default, that same day the Clerk of this Court entered a default against the FCC and the FEC. §g§ Entry of Default at 1. On October 25, 2010, Mr. Judd filed a motion for default judgment in which he asserted that "the [d]efendants have been served with all pleadings and motions in this action, by U.S. Mail First Class" and that he therefore is "entitled to a Default Judgment." Judd Mot. at 2. In response, the FCC and the FEC each filed a motion to vacate the entry of default. § FCC Mot. at 1-4; FEC Mot. at 1-5. Each argues that good cause exists to set aside the default because Mr. Judd in fact never effected proper service on them: Despite the assertion of service in Judd’s Affidavit in Support of Default . . . , the docket in this matter contains no entry showing that Judd requested the clerk in the Eastem District of Texas to issue a summons or that Judd filed a valid return of service. . . . After this matter was transferred to this Court on May 20, 2010 . . . , Judd similarly did not request the issuance of a summons or file a retum of service. . . . Judd has thus failed to comply with the Court’s July 16, 2010 Order requiring him to "file an affidavit proving service." . . . Accordingly, the requirements of Rule 4(i)(2) and 4(I)(i) have not been met and Judd has failed to [properly effect service]. FEC Mot. at 2; g:_e FCC Mot. at 2. And in further support of the FEC’s position, it notes that the Court’s July 16, 2010 Memorandum Opinion and Order dismissed "[t]he only count that referenced a statute within the [FEC’S] jurisdiction." FEC Mot. at 2. Thus, because the Court has dismissed the only claim against the FEC, its "defenses to plaintiffs claim . . . would . . . be ‘meritorious,’ [and] good cause exists to set aside the default." FEC Mot. at 2. Mr. Judd then filed an opposition and a motion to strike the defendants’ respective motions to set aside the default. § Judd Opp. at l; Judd Mot. to Strike at 1-2. This matter therefore is ripe for decision. But while the issue of whether to set aside the default was pending before the Court, Mr. Judd filed a total of 23 additional motions, consisting of the following: an emergency request for access to law books in the library and a related motion for a preliminary injunction [Dkt. Nos. 34, 63]; two identical applications for class action certification [Dkt. Nos. 39, 70]; three identical motions to stay proceedings pursuant to 28 U.S.C. § 1292(d)(4)(B) [Dkt. No. 56, 62, 82]; an amended motion to transfer the claims and this action to the United States Court of Federal Claims [Dkt. No. 79]; three identical amended notices of appeal to the United States Court of Appeals for the Federal Circuit [Dkt. Nos. 56, 62, 82]; two identical amended requests to file a pro se appeal [Dkt. Nos. 68, 73]; four identical motions for leave to file an amended complaint [Dkt. Nos. 57, 61, 74, 83]; two identical motions for no evidence summary judgment [Dkt. Nos. 67, 71]; a demand for summary judgment [Dkt. No. 87]; a motion for a preliminary injunction on the 2012 Presidential Primary Election [Dkt. No. 81]; two identical motions for relief from the Court’s July 16, 2010 decision and Judge Kennedy July 28, 2008 decision in Civil Action No. 08-1290 [Dkt. Nos. 75, 76]. In response to this spate of filings, the FCC asked the Court to impose filing restrictions against Mr. Judd. §§ FCC Mot. for Restrictions at 1-4. Mr. Judd opposes the FCC’s request, and this matter also is ripe for decision. II. DISCUSSION A. Gooa' Cause to Set Aside the Entry of Default The Clerk of this Court entered a default against the FCC and the FEC on October 15, 2010. § Entry of Default at 1. Mr. Judd requests that the Court now enter a default judgment, and the FCC and FEC request that the Court vacate the entry of default. Under Rule 55 of the Federal Rules of Civil Procedure, "[t]he Court may set aside the entry of default if no judgment has been entered when good cause is shown." Van De Berg v. Social Sec. Admin., 254 F.R.D. 144, 145 (D.D.C. 2008); %_e Bennett v. United States, 462 F. Supp. 2d 35, 37 (D.D.C. 2006). "The decision to set aside an entry of default rests in the discretion of the district court." Van De Berg v. Social Sec. Admin., 254 F.R.D. at 145. No judgment has been entered against the FCC or the FEC, and the Court finds good cause to set aside the entry of default because, as discussed below, Mr. Judd has failed to effect proper service of process.5 A default "cannot be entered where there was insufficient service of process. Although default may be entered upon a defendant’s failure to plead or otherwise defend , . . . a defendant’s obligation to respond to a complaint arises only upon service 5 With respect to the FEC, good cause also exists because the Court already dismissed as frivolous the only claim against it. §§ Judd v. FCC, 723 F. Supp. 2d at 225; §§ ali FEC Mot. at 1. In its prior decision, however, the Court did not specify that the FEC in fact was dismissed from this case. Accordingly, to the extent that there exists any ambiguity, the FEC is no longer a defendant in this case. of the summons and complaint." Scott v. District of Columbia, 598 F. Supp. 2d 30, 36 (D.D.C. 2009). Accordingly, because Mr. Judd failed to effect proper service on either the FCC or the FEC, their "obligation to plead or otherwise respond ha[s] actually not arisen." E. The Court therefore will deny Mr. Judd’s motion for default judgment and will grant the FCC’s and the FEC’s motions to set aside the default.° B. Insujjicient Service of Process "Before a court may exercise personal jurisdiction over a defendant, the procedural requirement of proper service of summons must be satisfied to assure notice to the defendant." Toms v. Hantman, 530 F. Supp. 2d 188, 190 (D.D.C. 2008). Proper service of process therefore "‘is not some mindless technicality."’ Williams v. GEICO Corp., Civil Action No. 10-1420, 2011 WL 2443106, at 4 (D.D.C. June 20, 2011) (quoting Friedman v. In re P_r&r, 929 F.2d 1151, 1156 (6th Cir. 1991)). Valid service of process "is necessary to assert personal jurisdiction over a defendant" and it "also notifies the defendant that a party has commenced legal action against it." I_d. Consequently, "[c]ourts routinely dismiss complaints for insufficient service of process." Whitehead v. CBS/Viacom, Inc., 221 F.R.D. l, 2 (D.D.C. 2004); Se_e also Chen v. District of Columbia, 256 F.R.D. 263, 265 (D.D.C. 2009) A plaintiff has the burden of proving proper service. Mann v. Castiel, 729 F. Supp. 2d 191, 194 (D.D.C. 2010) (citing Fed. R. Civ. P. 4(!)). As Rule 4(c) of the Federal Rules of Civil Procedure provides, in order to effect proper service, a plaintiff "is responsible for having [a] summons and complaint served within the time allowed by Rule 4(m) . . . ." FED. R. ° The Court also will deny Mr. Judd’s motion to strike the govemment’s motion to set aside the entry of default. CIV. P. 4(c)(l) (emphasis added). Rule 4(m) provides that a plaintiff must effect proper service of process "within 120 days of filing a complaint." Mann v. Castiel, 729 F. Supp. 2d at 194 (citing FED. R. CIv. P. 4(m)). lf a defendant is not served within 120 days after the complaint is filed, the court - on motion or on its own after notice to the plaintiff - must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. FED. R. CIv. P. 4(m). ln this case, because the FCC and FEC are agencies of the United States, service must be effected under Rule 4(i), "which requires that to serve an agency of the United States, plaintiff must send a copy of the summons and of the complaint by registered or certified mail to the agency as well as by serving the United States in its own right.” Judd v. FCC, 723 F. Supp. 2d at 225 (emphasis in original). Such service, however, cannot be effected by a party. §§ Olson v. FEC, 256 F.R.D. 8, 10 (D.D.C. 2009); Martens v. United States, Civil Action No. 05-1805, 2007 WL 1214576, at 1 (D.D.C. Feb. 14, 2007). Rule 4(c)(2) provides that "[a]ny person who is at least 18 years old and not a party may serve a summons and complaint." FED. R. CIV. P. 4(0)(2). Thus, "Rule 4(c)(2) is violated when a plaintiff personally attempts to serve a defendant _ including the United States _ by mai1." Olson v. FEC, 256 F.R.D. at 10 (emphasis added); ge Martens v. United States, 2007 WL 1214576, at 1; §e_e also Otto v. United States, Civil Action No. 05-2319, 2006 WL 2270399, at 1-2 (D.D.C. June 28, 2006). Mr. Judd has prepaid the filing fee in this case in full. § Minute Entry, May l, 2008. He therefore "is not proceeding in forma pauperis and . . . is responsible for service of process." Bennett v. Crawford, Civil Action No. 07-1321, 2008 WL 274909, at 1 n.l (D.D.C. Jan. 31, 2008) (emphasis in original); see Evans v. Horel, Civil Action No. 08-l900, 2009 WL 1582835, at l (N.D. Cal. June 4, 2009). Comt)are Gonzalez v. Holder, Civil Action No. 10-0346, 2011 WL 442110, at 3 (D.D.C. Feb. 8, 201 1) ("[A] pro se party who is proceeding in forma pauperis may rely on the Clerk of Court and the United States Marshals Service to effect service of process on his behalf.") (citing FED. R. CIV. P. 4(c)(3)) (emphasis in original). While Mr. Judd is not proceeding in forma pauperis, he is, however, proceeding pro se, and such litigants generally "are allowed more latitude than litigants represented by counsel to correct defects in service of process and pleadings[.]" Lawson v. Pepco, 721 F. Supp. 2d l, 3-4 (D.D.C. 2010) (internal quotations and citation omitted). But this consideration "does not constitute a license for a plaintiff filing pro se to ignore the Federal Rules of Civil Procedure[.]" Q. (intema1 quotations and citation omitted). As discussed, on J u1y 16, 2010, Mr. Judd was instructed to "provide an affidavit of proper service or show cause why the case should not be dismissed for failure to serve defendants by November 16, 2010." Judd v. District of Columbia, 723 F. Supp. 2d at 225. He was explicitly advised how service must be made on an agency of the United States. §§ § On October 15, 2010, Mr. Judd filed five affidavits regarding his purported service on the defendants. Not only do these affidavits fail to provide proof satisfactory to the Court that proper service was made, se_e FED. R. CIV. P. 4(1); ge a_l§o LOC. CIV. R. 5.3 _ they also establish that Mr. Judd’s attempts at service have been ineffective. With respect to the issue of proof, Mr. Judd never certifies under penalty of perjury what it was, if anything, that he purportedly served. Mr. Judd "is responsible for having [a] summons and complaint served" on the defendants. FED. R. 10 CIV. P. 4(c)(1) (emphasis added). But Mr. Judd’s affidavits make no mention of a summons or a complaint. And the Court, upon its own review of the record, sees no evidence of a summons ever having been issued in this case. S_ee all FCC Mot. at 2 ("[T]he Court’s docket shows that Plaintiff never issued a summons to the U.S. Attorney’s Office."); FEC Mot. at 2 ("[T]he docket in this matter contains no entry showing that Judd requested the clerk . . . to issue a summons . . . .").7 Without such a summons, Mr. Judd’s attempts at service would be ineffective under Rule 4(0)(1). §_ee_: FED. R. CIV. P. 4(0)(1); §e_e also Rangel v. United States, Civil Action No. 09-3061, 2010 WL 3715489, at 2 (E.D. Wa. Sept. 13, 2010). Moreover, although Mr. Judd avers in his affidavits that he served the defendants "via registered or certified mail," sic Judd Affs. at 1-5, Mr. Judd later contradicts his affidavits in his papers, stating that "[t]he [d]efendants have been served with all pleadings and motions in this action, by U.S. Mail First Class . . . ." Judd Opp. at 3 (emphasis added). The Court therefore finds that Mr. Judd has failed to "provide an affidavit of proper service," as was required, by November 16, 2010. Judd v. District of Columbia, 723 F. Supp. 2d at 225. Going further, however, Mr. Judd avers that he himself served the defendants via registered or certified mail. § Judd Affs. at 1-5. This attempt at service violates Rule 4(c)(2): Mr. Judd cannot "personally attempt[] to serve a defendant - including the United States _ by mail." Olson v. FEC, 256 F.R.D. at 10 (emphasis added); Martens v. United States, 2007 WL 1214576, at 1; g also Otto v. United States, Civil Action No. 05-2319, 2006 WL 2270399, 7 1n his papers, Mr. Judd’s unswom statements with respect to whether he sent a summons to the defendants are entirely inconsistent. Compare Judd Mot. at 1 ("The district court never issued Summons or provided Pro Se Plaintiff with any Summons to Serve on defendants."), § Judd Opp. at 1 ("The Defendants were properly and legally served with Summons and Complaint, and have failed to file and serve an Answer."). 11 at 1-2 (D.D.C. June 28, 2006). Thus, even if Mr. Judd had provided proof of having served both a summons and a complaint on the defendants, which he has not, his affidavits make clear that his only attempts at service in this case have been ineffective.g The Court concludes that l\/Ir. Judd has failed entirely to "provide an affidavit of proper service or show cause why the case should not be dismissed for failure to serve defendants by November 16, 2010." Judd v. FCC, 723 F. Supp. 2d at 225. Because this case has been pending for over three years, because Mr. Judd is a veteran pro se litigant, and because Mr. Judd was given ample notice by this Court’s prior Memorandum Opinion and Order, the Court will not exercise its discretion to afford him yet more time to effect service."° Mr. Judd’s complaint will be dismissed without prejudice pursuant to Rule 4(m) of the Federal Rules of Civil Procedure. C. Filz'ng Restrictions instead of complying with the Court’s July 16, 2010 Memorandum Opinion and Order, Mr. Judd filed over 20 additional motions and other papers in the span of two months. Because the Court will dismiss Mr. Judd’s complaint without prejudice for failure to effect 8 Mr. Judd argues that the FCC and the FEC waived service of process. S_eg Judd Opp. to Mot. for Restrictions at 1. This argument is frivolous. §e_e FCC Restrictions Reply at 3-5. 9 While asserting that service was proper in this case, § Judd Opp. at l, Mr. Judd nevertheless now requests that the Court allow him to serve the defendants under Rule 5(b)(3) of the Federal Rules of Civil Procedure using the Court’s "electronic service" which "would be equivalent to Certified or Registered mail . . . ." Judd Mot. Service at l. This request, filed on April 7, 2011, will be denied. Mr. Judd has had ample time to effect proper service on the defendants in this case and has failed to do so. Furthermore, Rule 5(b)(3) requires that a defendant give his or her written consent to such electronic service. gee FED. R. CIV. P. 5(b)(3) & (b)(2)(E). The defendants have given no such consent. 12 proper service of process, all of these pending motions will be denied as moot.‘° Upon the FCC’s request, however, the Court will impose filing restrictions on Mr. Judd: the Clerk of the Court shall no longer accept for filing anything submitted by Mr. Judd in this case without first obtaining leave of this Court. The Court may impose filing restrictions based on its "inherent power to regulate [its] docket, promote judicial efficiency, and deter frivolous filings." United States v. Samuels, No. 10-5108, 2011 WL 1127457, at 3 n.l (10th Cir. Mar. 29, 2011) (citing Van Sickle v. Holloway, 791 F.2d 1431, 1437 (10th Cir. 1986)); g:_c_: also Sieverding v. U.S. Dep’t ofJustice, 693 F. Supp. 2d 93, 111 n.l7 (D.D.C. 2010). The Court "has previously authorized sanctions against litigants who confuse quantity with quality and barrage the Court with filings[.]" McCreary v. Heath, Civil Action No. 04-0623, 2005 WL 975736, at 1 (D.D.C. Apr. 22, 2005). Mr. Judd is no stranger to such restrictions. g Judd v. FEC, 2008 WL 2901643, at 1 n.l (noting that the United States Courts of Appeals for the D.C. Circuit, the Fifth Circuit, the Tenth Circuit, and the Federal Circuit, as well as the United States Supreme Court, "have all imposed filing restrictions on [Mr. Judd] for his abusive filing history"). lndeed, in 2006, our court of appeals, on its own motion, enjoined Mr. Judd from filing any new cases before it without first obtaining leave of the court in light of his "history of filing successive, substantially the same, and uniformly frivolous pleadings [that] constitute an abuse of the judicial process." ‘° With one exception: the Court will deny on the merits Mr. Judge’s two identical motions for relief from the Court’s July 16, 2010 decision and Judge Kennedy’s July 28, 2008 decision in Civil Action No. 08-1290. The Court already denied Mr. Judd’s request that the Court reconsider its July 16, 2010 decision, _se_e Memorandum Opinion and Order at 1-2, Mar. 21, 2011, and Mr. Judd, in his new motions, again "fail[s] to meet his burden of demonstrating that reconsideration is warranted[.]" l£l. at 1. Mr. Judd’s request for relief from Judge Kennedy’s July 28, 2008 decision is a matter not properly before this Court. 13 Judd v. United States, Nos. 05-5289, 05-5290, 2006 WL 1565084, at 1 (D.C. Cir. Feb. 14, 2006). Mr. Judd has again flooded the Court with motions and other papers, all of which were filed while his motion for default judgment and the defendants’ motions to vacate default were pending. Many of the pending motions are duplicative, if not identical: for example, among others, Mr. Judd has filed two identical applications for class action certification; three identical motions to stay proceedings in this case; and four identical motions for leave to file an amended complaint. Furthermore, Mr. Judd’s motions "ha[ve] escalated in their allegations and rhetoric." McCreag v. Heath, 2005 WL 975736, at 2. As the FCC describes it: The motions range from requesting an injunction or writ of mandamus against (non-party) Bureau of Prisons . . . (Dkt. No. 63) for allegedly removing law books and providing access to legal information through a database[,] to requesting an appeal to the United States Supreme Court (Dkt. Nos. 76 & 71)[,] to moving for class action certification (Dkt. No. 70), to demanding relief under the Tucker Act in the United States Court of F ederal Claims for monetary damages allegedly owed by the government for matching funds as a result of [Mr. Judd’s] bid for the Presidential Nomination in the previous election (Dkt. Nos. 68, 69, and 73). FCC Mot. for Restrictions at 1. The Court therefore will grant the FCC’S motion and will impose filing restrictions on Mr. Judd, who clearly has confused "quantity with quality and [has] barrage[d] the Court with filings" in this case. McCreary v. Heath, 2005 WL 975736, at 1. The Court finds that "no adverse decision would deter [Mr. Judd] from continuing to file" and "will tolerate [Mr. Judd’s] abuses of the judicial system no longer . . . ." E. at 2 (intemal quotations and citation omitted). 14 lIl. CONCLUSION F or the foregoing reasons, the Court will deny Mr. Judd’s motion for default judgment [Dkt. No. 38], will grant the FCC’s and the FEC’s motions to set aside the entry of default [Dkt. Nos. 44, 51], will grant the FCC’s motion for imposition of filing restrictions against Mr. Judd [Dkt. No. 78], and will dismiss Mr. Judd’s complaint without prejudice for failure to effect proper service of process pursuant to Rule 4(m) of the Federal Rules of Civil Procedure. An Order consistent with this Opinion shall issue this same day. 80 ORDERED. PAUL L. FRIEDMAN DATE: z " \ \\ United States District Judge 15	01-03-2023	04-04-2014
https://www.courtlistener.com/api/rest/v3/opinions/2687076/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA ERICK LORRAY ARMSTRONG, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1685 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 18, 2014. An appeal from the Circuit Court for Bay County. Elijah Smiley, Judge. Erick Lorray Armstrong, pro se, Appellant. Pamela Jo Bondi, Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. LEWIS, C.J., BENTON and MARSTILLER, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/2687077/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA DONALD S. VERNE, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1713 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 17, 2014. An appeal from the Circuit Court for Escambia County. Edward P. Nickinson, III, Judge. Donald S. Verne, pro se, Appellant. Pamela Jo Bondi, Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. VAN NORTWICK, CLARK, and SWANSON, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/2687082/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA COMER BRASCOM, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1798 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 3, 2014. An appeal from the Circuit Court for Leon County. James C. Hankinson, Judge. Comer Brascom, pro se, Appellant. Pamela Jo Bondi, Attorney General, and Jay Kubica, Assistant Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. VAN NORTWICK, CLARK, and SWANSON, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/98224/	234 U.S. 245 (1914) UNITED STATES v. FIRST NATIONAL BANK OF DETROIT, MINNESOTA. UNITED STATES v. NICHOLS-CHISHOLM LUMBER COMPANY. UNITED STATES v. NICHOLS-CHISHOLM LUMBER COMPANY. Nos. 873, 874, 875. Supreme Court of United States. Argued April 7, 1914. Decided June 8, 1914. APPEALS FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT. 252 The Solicitor General, with whom Mr. C.C. Daniels and Mr. W.A. Norton, Special Assistant to the Attorney General, were on the brief, for the United States. Mr. Ransom J. Powell, with whom Mr. George T. Simpson and Mr. Ernest C. Carman were on the brief, for appellees. 257 MR. JUSTICE DAY, after making the foregoing statement, delivered the opinion of the court. Before the transfers here complained of and while the lands were held in trust, subject to the provisions of the act of February 8, 1887, supra, the Clapp Amendment was passed, having the purpose of removing the restrictions upon alienation in certain cases. This act provides, (34 Stat., p. 1034): "That all restrictions as to sale, incumbrance, or taxation for allotments within the White Earth Reservation in the State of Minnesota, heretofore [amended March 1, 1907, the word `heretofore' being substituted for the word `now'] or hereafter held by adult mixed-blood Indians, are hereby removed, and the trust deeds heretofore or hereafter executed by the Department for such allotments are hereby declared to pass the title in fee simple, or such mixed bloods upon application shall be entitled to receive a patent in fee simple for such allotments; and as to full bloods, said restrictions shall be removed when the Secretary of the Interior is satisfied that said adult full-blood Indians are competent to handle their own affairs, and in such case the Secretary of the Interior shall issue to such Indian allottee a patent in fee simple upon application." 258 It is at once apparent from reading this act that it deals with two classes, adult mixed blood Indians, concerning whom all restrictions as to sale, incumbrance or taxation are removed, and full blood Indians, whose right to be free from restrictions shall rest with the Secretary of the Interior, who may remove the same upon being satisfied that such full blood Indians are competent to handle their own affairs. This case turns upon the construction of the words "mixed blood Indians." It is the contention of the Government that mixed blood means those of half white or more than half white blood, while the appellees insist, and this was the view adopted by the Circuit Court of Appeals, that the term mixed blood includes all who have an identifiable mixture of white blood. If the Government's contention be correct, it follows that for the purposes of this suit all of less than half white blood must be regarded as full blood Indians, all others as mixed bloods. Upon the appellees' contention the line is drawn between full bloods as one class and all having an identifiable admixture of white blood as the other. If we apply the general rule of statutory construction that words are to be given their usual and ordinary meaning, it would seem clear that the appellees' construction is right, for a full blood is obviously one of pure blood, thoroughbred, having no admixture of foreign blood. That this natural and usual signification of plain terms is to be adopted as the legislative meaning in the absence of clear showing that something else was meant, is an elementary rule of construction frequently recognized and followed in this court. United States v. Fisher, 2 Cranch, 358, 399; Lake County v. Rollins, 130 U.S. 662, 670; Dewey v. United States, 178 U.S. 510, 521. Interpreted according to the plain import of the words the persons intended to be reached by the clause are divided into two and only two well-defined classes, full blood Indians and mixed 259 bloods. There is no suggestion of a third class, having more than half of white blood or any other proportion than is indicated in the term mixed blood, as contrasted with full blood. If the Government's contention is correct, the Indians of full blood must necessarily include half bloods, and mixed bloods must mean all having less than half white blood and none others. Such construction is an obvious wresting of terms of plain import from their usual and well-understood signification. But the Government insists that to effect the legislative purpose the words must be interpreted as the Indians understood them, and cases from this court (Jones v. Meehan, 175 U.S. 1; Starr v. Long Jim, 227 U.S. 613) are cited to the effect that Indian treaties and acts to which the Indians must give consent before they become operative must be interpreted so as to conform to the understanding of the Indians as to the meaning of the terms used. The justice and propriety of this method of interpretation is obvious and essential to the protection of an unlettered race, dealing with those of better education and skill, themselves framing contracts which the Indians are induced to sign. But the legislation here in question is not in the nature of contract and contains no provision that makes it effectual only upon consent of the Indians whose rights and privileges are to be affected. Evidently this legislation contemplated in some measure the rights of others who might deal with the Indians, and obviously was intended to enlarge the right to acquire as well as to part with lands held in trust for the Indians. The Government refers, in support of its contention, to reports of Congressional committees, showing after effects of this legislation, which was followed, as the reports tend to show, by improvident sales and incumbrances of Indian lands and wasteful extravagance in the disposition of the proceeds of sales, resulting in suffering to the former proprietors of the lands sold and mortgaged. But 260 these after facts can have little weight in determining the meaning of the legislation and certainly cannot overcome the meaning of plain words used in legislative enactments. If the effect of the legislation has been disastrous to the Indians, that fact will not justify the courts in departing from the terms of the act as written. If the true construction has been followed with harsh consequences, it cannot influence the courts in administering the law. The responsibility for the justice or wisdom of legislation rests with the Congress, and it is the province of the courts to enforce, not to make, the laws. St. Louis, Iron Mt. & S. Ry. Co. v. Taylor, 210 U.S. 281, 294; Texas Cement Co. v. McCord, 233 U.S. 157, 163. The Government further insists that its interpretation of the act is consistent with its policy to make competency the test of the right to alienate, and that the legislation in question proceeds upon the theory that those of half or more white blood are more likely to be able to take care of themselves in making contracts and disposing of their lands than those of lesser admixture of such blood. But the policy of the Government in passing legislation is often an uncertain thing, as to which varying opinions may be formed, and may, as is the fact in this case, afford an unstable ground of statutory interpretation. Hadden v. The Collector, 5 Wall. 107, 111. And again Congress has in other legislation not hesitated to place full blood Indians in one class and all others in another. Tiger v. Western Investment Co., 221 U.S. 286. In that case this court had occasion to deal with certain sections of the act of April 26, 1906, c. 1876, 34 Stat. 137, providing that no full blood Indian of certain tribes should have power to alienate or incumber allotted lands for a period of twenty-five years, unless restrictions were removed by act of Congress. By section 22 of the act all adult heirs of deceased Indians were given the right to convey their lands, but for the last sentence of the section which kept full 261 blood Indians to their right to convey under the supervision of the Secretary of the Interior. Therefore all adult heirs of any deceased Indian other than a full blood might convey, but the full blood only with the approval of the Secretary of the Interior. In this important provision the restrictions were removed as to all classes of Indians other than full bloods. In other words, there as here, the Indians were divided into two classes, full bloods in one class and all others in the second class. Furthermore, the appellees' construction accords with the departmental construction, as shown by the facts stipulated. Such was the construction given by the Indian Commissioner to the treaty of September 30, 1854, supra, wherein provision was made for mixed blood Indians among the Chippewas, and the Indian agent at Detroit, Michigan, was instructed by the Indian Commissioner that the term mixed blood had been construed to mean all who are identified as having a mixture of Indian and white blood. Such was the interpretation of the Department of Interior, in the first place at least, in administering the matter under the Clapp Amendment. It is true that the Government representatives at Detroit, Minnesota, were of the opposite opinion, for the reasons we have stated above, and that the Second Assistant Commissioner in his reply, while reaching the conclusion we have, stated that he would confer with the Department of Justice. While departmental construction of the Clapp Amendment does not have the weight which such constructions sometimes have in long continued observance, nevertheless it is entitled to consideration, the early administration of that amendment showing the interpretation placed upon it by competent men having to do with its enforcement. The conviction is very strong that if Congress intended to remove restrictions only from those who had half white blood or more, it would have inserted in the *262 act the words necessary to make that intention clear, that is, we deem this a case for the application of the often expressed consideration, aiding interpretation, that if a given construction was intended it would have been easy for the legislative body to have expressed it in apt terms. Farrington v. Tennessee, 95 U.S. 679, 689; Bank v. Matthews, 98 U.S. 621, 627; Tompkins v. Little Rock & Ft. S.R. Co., 125 U.S. 109, 127; United States v. Lexington Mill Co., 232 U.S. 399, 410. Congress was very familiar with the situation, the subject having been before it in many debates and discussions concerning Indian affairs. This was a reservation inhabited by Indians of full blood and others of all degrees of mixed blood, some with a preponderance of white blood, others with less and many with very little. If Congress, having competency in mind and that alone, had intended to emancipate from the prevailing restriction on alienation only those who were half white or more, by a few simple words it could have effected that purpose. We cannot believe that such was the congressional intent, and we are clearly of opinion that the courts may not supply the words which Congress omitted. Nor can such course be induced by any consideration of public policy or the desire to promote justice, if such would be its effect, in dealing with dependent people. We reach the conclusion that the Circuit Court of Appeals rightly construed this statute, and its decrees are Affirmed.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/96095/	194 U.S. 338 (1904) NORTHERN PACIFIC RAILWAY COMPANY v. DIXON. No. 211. Supreme Court of United States. Argued April 13, 1904. Decided May 16, 1904. CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT. 341 Mr. C.W. Bunn, Mr. Emerson Hadley and Mr. James B. Kerr for plaintiff in error, submitted. Mr. A.M. Antrobus for defendant in error, cited as to obligation to provide orders and schedules of trains: B. & O.R.R. Co. v. Andrews, 1 C.C.A. 639; Nor. Pac. R.R. Co. v. Poirier, 15 C.C.A. 52; Lewis v. Seifert, 11 Atl. Rep. 514; Railroad Co. v. Camp, 13 C.C.A. 233; Oregon Short Line v. Frost, 21 C.C.A. 186; Danigan v. Railroad Co., 56 Connecticut, 285; Hough v. Railroad Co., 100 U.S. 213, 226; Nor. Pac. R.R. Co. v. Herbert, 116 U.S. 642, 660. Local operators and the train operators are not fellow servants. Bentz v. Railroad Co., 99 Fed. Rep. 657; 40 C.C.A. 56, distinguished, and see cases cited in that opinion; Dana v. Railroad Co., 92 N.Y. 639; Shehan v. Railroad Co., 91 N.Y. 332; Flike v. Railroad Co., 53 N.Y. 549; Booth v. Railroad Co., 91 N.Y. 38; Ell v. Nor. Pac. Ry. Co., 12 L.R.A. 97; Nor. Pac. Ry. Co. v. Mix, 121 Fed. Rep. 476. The local operator is a vice principal. M.K. & T. Ry. Co. v. Elliott, 42 C.C.A. 188; Lewis v. Seifert, 116 Pa. St. 627; B. & O.R.R. Co. v. Camp, 13 C.C.A. 233; Hankins v. Railroad Co., 142 N.Y. 416; Harrison v. Railroad Co., 79 Michigan, 407; Hall v. Galveston &c. R.R. Co., 39 Fed. Rep. 18; Price v. Railroad Co., 145 U.S. 651. 342 MR. JUSTICE BREWER, after making the foregoing statement, delivered the opinion of the court. A servant is entitled to recover damages for injuries suffered through the personal fault or misconduct of his employer, but when the employer has been personally free from blame and the injury results from the fault or misconduct of a fellow servant it would seem reasonable that the wrongdoer should be alone responsible, and that one who is innocent should not be called upon to pay damages. And such is the 343 general rule. But where the employer is a railroad or other corporation having a large number of employes, sometimes engaged in different departments of service, certain limitations or qualifications of this general rule have been prescribed. Perhaps no question has been more frequently considered by the courts than that of fellow servant, and none attended with more varied suggestions and attempted qualifications. It has been discussed so often that any extended discussion in the present case is unnecessary, and it is sufficient to state the principal suggestions and consider their applicability to the case at bar. In a recent case in this court, New England Railroad Company v. Conroy, 175 U.S. 323, it was said (p. 328): "We have no hesitation in holding, both upon principle and authority, that the employer is not liable for an injury to one employe occasioned by the negligence of another engaged in the same general undertaking; that it is not necessary that the servants should be engaged in the same operation or particular work; that it is enough, to bring the case within the general rule of exemption, if they are in the employment of the same master, engaged in the same common enterprise, both employed to perform duties tending to accomplish the same general purposes, or, in other words, if the services of each in his particular sphere or department are directed to the accomplishment of the same general end." Tested by this, it is obvious that the local operator was a fellow servant with the fireman. They were "engaged in the same general undertaking," the movement of trains. They were called upon "to perform duties tending to accomplish the same general purposes," and "the services of each in his particular sphere or department were directed to the accomplishment of the same general end." The fireman who shovels coal into the fire-box of the engine is not doing precisely the same work as the engineer, neither is the conductor who signals to the engineer to start or to stop, nor the operator who delivers from the telegraph office at the station to the 344 engineer orders to move, and who reports the coming and the going of trains, and yet they are all working each in his particular sphere towards the accomplishment of this one result, the movement of trains. Another qualification suggested is where the one guilty of the negligence has such general control and occupies such relation to the work that he in effect takes the place of the employer becomes a vice principal, or alter ego, as he is sometimes called. If an employer, whether an individual or a corporation, giving no personal attention to the work, places it in the entire control of another, such person may be not improperly regarded as the principal and his negligence that of the principal. That thought has in some cases been carried further, and when it appeared that the work in which the employer was engaged was divided into separate and distinct departments, the one in charge of each of those departments has been regarded as also a vice principal. In Baltimore & Ohio Railroad v. Baugh, 149 U.S. 368, 383, we said: "It is only carrying the same principle a little further and with reasonable application, when it is held that, if the business of the master and employer becomes so vast and diversified that it naturally separates itself into departments of service, the individuals placed by him in charge of those separate branches and departments of service, and given entire and absolute control therein, are properly to be considered, with respect to employes under them, vice principals, representatives of the master, as fully and as completely as if the entire business of the master was by him placed under charge of one superintendent. It was this proposition which the court applied in the Ross case, holding that the conductor of a train has the control and management of a distinct department. But this rule can only be fairly applied when the different branches or departments of service are in and of themselves separate and distinct." So also in Northern Pacific Railroad v. Peterson, 162 U.S. 346, it was held that the foreman of a gang of laborers employed 345 in putting in ties and keeping in repair a part of the road, although he had the power to hire or discharge any laborer and exclusive control and management in all matters connected with their work, was a fellow servant with the men in the gang, and on page 355 the rule was thus stated: "The rule is that in order to form an exception to the general law of non-liability the person whose neglect caused the injury must be `one who was clothed with the control and management of a distinct department, and not a mere separate piece of work in one of the branches of service in a department.' This distinction is a plain one, and not subject to any great embarrassment in determining the fact in any particular case." Obviously there is nothing in this qualification which has application here. The negligent person was a local operator and station agent, and in no reasonable sense of the term a vice principal or in charge of any department. Another suggestion is, that the doctrine of fellow servant does not apply where the servant injured and the servant guilty of the negligence are engaged in separate departments of service. In Northern Pacific Railroad v. Hambly, 154 U.S. 349, a common laborer was employed under the direction of a section boss in building a culvert on the line of defendant's railroad, and while so employed was struck and injured by a moving passenger train, the injury resulting solely through the misconduct and negligence of the conductor and engineer of the train. It was held that they were fellow servants, and in respect to this suggestion it was said (p. 357): "As a laborer upon a railroad track, either in switching trains or repairing the track, is constantly exposed to the danger of passing trains, and bound to look out for them, any negligence in the management of such trains is a risk which may or should be contemplated by him in entering upon the service of the company. This is probably the most satisfactory test of liability. If the departments of the two servants are so far separated from each other that the possibility 346 of coming in contact, and hence of incurring danger from the negligent performance of the duties of such other department, could not be said to be within the contemplation of the person injured, the doctrine of fellow service should not apply." Applying this to the case before us, manifestly the work of the fireman and the operator brought the parties closely together in the matter of the movement of the trains. Dixon knew that any negligence on the part of the operator might result in injury to him, and must have contemplated such possibility when he entered the service of the company. It is urged that "it is as much the duty of the company to give correct orders for the running of its trains so they would not collide as it was to see that their servants had reasonably safe tools and machinery with which to work, and a reasonably safe place in which to work," and hence, that one who is employed in securing the correct orders for the movement of trains is doing the personal work of the employer, and not to be regarded as a fellow servant of those engaged in operating and running the trains. But the master does not guarantee the safety of place or of machinery. His obligation is only to use reasonable care and diligence to secure such safety. Here the company had adopted reasonable rules for the operation of all its trains. No imputation is made of a want of competency in either the train dispatcher or the telegraph operator. So far as appears, they were competent and proper persons for the work in which they were employed. A momentary act of negligence is charged against the telegraph operator. No reasonable amount of care and supervision which the master had taken beforehand would have guarded against such unexpected and temporary act of negligence. Before an employer should be held responsible in damages it should appear that in some way, by the exercise of reasonable care and prudence, he could have avoided the injury. He cannot be personally present everywhere and at all times, and in the nature of things cannot guard against 347 every temporary act of negligence by one of his employes. As said in Whittaker v. Bent, 167 Massachusetts, 588, 589, by Mr. Justice Holmes, then a member of the Supreme Court of Massachusetts: "The absolute obligation of an employer to see that due care is used to provide safe appliances for his workmen is not extended to all the passing risks which arise from short-lived causes. McCann v. Kennedy, ante, p. 23. See also Johnson v. Boston Towboat Co., 135 Massachusetts, 209; Moynihan v. Hills Co., 146 Massachusetts, 586, 592, 593; Bjbjian v. Woonsocket Rubber Co., 164 Massachusetts, 214, 219." Without discussing more at length the various forms and phases of the question of fellow servants, or the many suggestions which have been made to qualify or limit the general doctrine, we answer the questions presented as follows: First. The telegraph operator was, under the circumstances described, a fellow servant of the fireman. Second. The negligence of the telegraph operator was the negligence of a fellow servant of the fireman, the risk of which the latter assumed. MR. JUSTICE WHITE, with whom concurred the CHIEF JUSTICE, MR. JUSTICE HARLAN and MR. JUSTICE McKENNA, dissenting. As it is given to me to understand the ruling now made, it reverses many previous decisions of this court and introduces into the doctrine of fellow servant, as hitherto applied in those decisions, a contradiction which will render it impossible in the future to test the application of the rule of fellow servant by any consistent principle. It is undoubtedly true that in many decisions of state courts of last resort the rigor of the rule of fellow servant has been assuaged by an extension of two conceptions, the one designated as "the department theory," and the other as the "doctrine of vice principal." By the application made of the 348 first of these in the decisions referred to the relation of fellow servant would not exist in any case where the servants were working in separate departments, even although engaged in a single enterprise or common employment. By the second, where even a limited authority was possessed by a particular employe, such authority would cause him not to be a fellow servant with those over whom the authority was exercised. But the decisions of this court, whilst not rejecting absolutely either the department, or the vice principal, theory, have with practical uniformity refused to adopt the broad import given to those theories as above stated. Accordingly it has been consistently held that the fact of separate departments did not destroy the relation of fellow servant unless the departments were substantially so distinct as to cause them to be independent one of the other to such an extent that the persons engaged in one or the other were not really employed in the same business. And so also as to the doctrine of vice principal, it has been uniformly held that it did not apply to every limited exercise of authority but was only applicable in cases where the person charged to be a vice principal possessed such general authority and supervision over the business as to cause him in effect to stand in the relation of master to those employed under him. But whilst thus declining to fritter away the rule of fellow servant by a latitudinarian application of the department and vice principal theories, such theories have always been applied by the decisions of this court wherever a given case was embraced in the doctrine as expounded in the rulings of this court above referred to Besides, it has been declared by an unbroken line of authority in this court that, wherever there rests upon the master a positive duty which the law has imposed upon him towards his servants, liability of the master or a failure to perform such positive legal duty could not be escaped by a resort to the principle of fellow servant because, in an action for damage occasioned by the neglect of the master to perform such positive duties, the doctrine of fellow servant had no application. 349 I content myself with referring to some of the leading and more recent cases of this court establishing all the propositions which I have previously stated. Baltimore & Ohio R.R. Co. v. Baugh, 149 U.S. 368; Northern Pacific R.R. Co. v. Hambly, 154 U.S. 349; Central Railroad Co. v. Keegan, 160 U.S. 259; Northern Pacific Railroad Co. v. Peterson, 162 U.S. 346; New England R.R. Co. v. Conroy, 175 U.S. 323. The inapplicability of the doctrine of fellow servant to a violation by the master of a positive duty resting on him, often stated in previous decisions, was reiterated in Baltimore & Ohio Railroad Company v. Baugh, supra, 387, and was fully restated in Central Railroad Co. v. Keegan, supra, where it was said (p. 263): "We held in Baltimore & Ohio Railroad Company v. Baugh, 149 U.S. 368, that an engineer and fireman of a locomotive engine running alone on a railroad, without any train attached, when engaged on such duty, were fellow servants of the railroad company; hence that the fireman was precluded from recovering damages from the company for injuries caused, during the running, by the negligence of the engineer. In that case it was declared that: `Prima facie, all who enter the employment of a single master are engaged in a common service and are fellow servants. .. . All enter in the service of the same master to further his interests in the one enterprise.' And whilst we in that case recognized that the heads of separate and distinct departments of a diversified business may, under certain circumstances, be considered, with respect to employes under them, vice principals or representatives of the master as fully and as completely as if the entire business of the master was by him placed under the charge of one superintendent, we declined to affirm that each separate piece of work was a distinct department, and made the one having control of that piece of work a vice principal or representative of the master. It was further declared that `the danger from the negligence of one specially in charge of the particular work is as obvious and as great as from that of those 350 who are simply coworkers with him in it; each is equally with the other an ordinary risk of the employment,' which the employe assumes when entering upon the employment, whether the risk be obvious or not. It was laid down that the rightful test to determine whether the negligence complained of was an ordinary risk of the employment was whether the negligent act constituted a breach of positive duty owing by the master, such as that of taking fair and reasonable precautions to surround his employes with fit and careful coworkers, and the furnishing to such employes of a reasonably safe place to work and reasonably safe tools or machinery with which to do the work, thus making the question of liability of an employer for an injury to his employe turn rather on the character of the alleged negligent act than on the relations of the employes to each other, so that, if the act is one done in the discharge of some positive duty of the master to the servant, then negligence in the act is the negligence of the master; but if it be not one in the discharge of such positive duty, then there should be some personal wrong on the part of the employer before he is liable therefor." And the Keegan case was cited approvingly in Northern Pacific Railroad Co. v. Peterson, supra, and Railroad Co. v. Conroy, supra. With the rules thus conclusively determined by the prior decisions of this court, let me come to consider the questions certified in the light of the facts stated in the certificate. Now, it is undoubted from those facts that the accident was caused by an erroneous order issued by the train dispatcher in charge of the movement of all the trains, and it is equally undoubted that the fatal error committed by the train dispatcher was caused by the neglect of an operator on the line of the railroad with whom the train dispatcher communicated before he gave the erroneous order. To determine whether the doctrine of fellow servant applies to such a case it must be ascertained first, whether the train dispatcher was a fellow servant with those operating the train; and, second, if he was not, can the 351 corporation avoid liability because the error of the train dispatcher was occasioned by the wrong of an operator? First. Whether it be considered in the light of the doctrine of vice principal as applied in the decisions of this court, or from the point of view of the positive duties of the master, it seems to me that the train dispatcher was not the fellow servant of the men running the trains. The dispatcher was a vice principal in the narrowest significance of that term. He represented the master as to the operation and movement of trains over the road. He formulated and transmitted the orders by which all were to be governed. The duty to obey his orders rested on those in charge of every train, and upon complying with this duty of obedience on their part their safety, as well as the safety of persons employed on or moved by every train, depended. As the duties of the train dispatcher were of the character just stated, it must besides follow, in any view, it seems to me, that in performing them he was discharging a positive duty imposed by law upon the master. For it cannot, in reason, I submit, be questioned that the law placed a positive duty on the master to furnish a safe place to work and to give such orders as would save those who obeyed them from loss of life or limb. The opinions of this court in the cases already referred to leave no room for question on this latter proposition, and there are other decisions not previously referred to which treat it as elementary. Hough v. Railroad Co., 100 U.S. 213; Union Pacific Railway Co. v. Daniels, 152 U.S. 684; Northern Pacific Ry. Co. v. Hambly, 154 U.S. 349; Northern Pacific R.R. Co. v. Peterson, 162 U.S. 346, 353. The doctrine of positive duty was applied to the determination of whether a train dispatcher was a vice principal and performed the master's duty, by the Court of Appeals of the State of New York, in Hankins v. New York, Lake Erie & Western R.R. Co., 142 N.Y. 416, and was also applied to the case of a train dispatcher by the Supreme Court of Pennsylvania in Lewis v. Seifert, 116 Pa. St. 628. Indeed, elaboration 352 to show that a train dispatcher is either a vice principal or one who in the discharge of his functions performs a positive duty of the master, is unnecessary, since the opinion of the court in this case proceeds upon the assumption that such is the case, and rests its conclusion upon the theory that the rule of fellow servant applies because the error of the train dispatcher was caused by the fault of the operator. This then is the real issue. Second. It being then established that the train dispatcher was either a vice principal or performing the positive duty of the master, does the fact that his wrongful order for the movement of the train was occasioned by the neglect of the operator with whom he communicated give rise to the application of the rule of fellow servant? I fail to perceive how it can, if the principles which the previous decisions of this court have upheld are to be adhered to. Those principles are these: That where the act is one done in the discharge of a positive duty of the master, negligence in the performance of the act, however occasioned, is the act of the master, and not the act of a fellow servant. To say to the contrary, it seems to me, is to cause the decisions of this court to reduce themselves to two contradictory propositions; first, that a servant when injured by the act of another person cannot be allowed to recover, by applying the broad construction given by many of the state courts to the vice principal and department theories, because the correct rule is the one which narrows those theories, and because, besides, the truer test by which to ascertain the existence of the relation of fellow servant is to determine whether the act done was one concerning a positive duty of the master; and, second, when a case is presented where the act complained of has been done by a vice principal, under the view adopted by this court of that theory, or involves a positive duty of the master, there may be no recovery because of the application of the doctrine of fellow servant to the case. The result being that recovery cannot be had in any event. The decisions of this court leave no doubt as to the true rule 353 on the subject. In Northern Pacific Railroad Co. v. Herbert, 116 U.S. 642, speaking of the positive duty of the master, the court, through Mr. Justice Field, said (p. 647): "This duty he cannot delegate to a servant so as to exempt himself from liability for injuries caused to another servant by its omission. Indeed, no duty required of him for the safety and protection of his servants can be transferred so as to exonerate him from such liability. The servant does not undertake to incur the risks arising from the want of sufficient and skillful colaborers, or from defective machinery or other instruments with which he is to work. His contract implies that in regard to these matters his employer will make adequate provision that no danger shall ensue to him." In Northern Pacific Railway Company v. Hambly, 154 U.S. 349, the court, speaking through Mr. Justice Brown, thus approvingly referred to the Herbert case (p. 357): "The case of Northern Pacific R.R. Co. v. Herbert, 116 U.S. 642, is an illustration of this principle. The plaintiff in this case was a brakeman in defendant's yard at Bismarck, where its cars were switched upon different tracks and its trains were made up for the road. He received an injury from a defective brake, which had been allowed to get out of repair through the negligence of an officer or agent of the company, who was charged with the duty of keeping the cars in order. It was held, upon great unanimity of authority, both in this country and in England, that the person receiving and the person causing the injury did not occupy the relative position of fellow servants. See also Hough v. Railway Co., 100 U.S. 213; Union Pacific Railway v. Daniels, 152 U.S. 684." In Union Pacific Ry. Co. v. Daniels, 152 U.S. 684, an action for injury occasioned by the breaking of a defective car wheel, the existence of which defect had not been discovered owing to insufficient inspection, liability was sought to be escaped upon the plea that a sufficient number of competent inspectors had been employed. But, declaring the liability of the railroad company, the court said (p. 689): 354 "There can be no doubt that under the circumstances of the case at bar the duty rested upon the company to see to it, at this inspecting station, that the wheels of the cars in this freight train, which was about to be drawn out upon the road, were in safe and proper condition, and this duty could not be delegated so as to exonerate the company from liability to its servants for injuries resulting from the omission to perform that duty or through its negligent performance." Again, in Northern Pacific R.R. Co. v. Peterson, 162 U.S. 346, speaking through Mr. Justice Peckham, of the positive duties of the master, the court said (p. 353): "He owes the duty to provide such servant with a reasonably safe place to work in, having reference to the character of the employment in which the servant is engaged. He also owes the duty of providing reasonably safe tools, appliances and machinery for the accomplishment of the work necessary to be done. He must exercise proper diligence in the employment of reasonably safe and competent men to perform their respective duties, and it has been held in many States that the master owes the further duty of adopting and promulgating safe and proper rules for the conduct of his business, including the government of the machinery and the running of trains on a railroad track. If the master be neglectful in any of these matters, it is a neglect of a duty which he personally owes to his employes, and if the employe suffer damage on account thereof, the master is liable. If, instead of personally performing these obligations, the master engages another to do them for him, he is liable for the neglect of that other, which, in such case, is not the neglect of a fellow servant, no matter what his position as to other matters, but is the neglect of the master to do those things which it is the duty of the master to perform as such." And these principles have been applied by the Court of Appeals of the State of New York to a case like the one at bar. Dana v. Railroad Co., 92 N.Y. 639. In that case, in communicating verbally to a conductor an order received from 355 the train dispatcher, an error was committed by one Keifer, a telegraph operator, and a collision between trains resulted. In the course of the opinion, reversing the judgment which had been entered in favor of the railroad company, the court said (p. 642): "For Keifer's act, in this respect, the defendant is clearly liable. The act he was required to do, and did perform, was one for which the master was responsible as a duty pertaining to itself, and as to it Keifer occupied the place of master. (Flike v. Boston & Albany R.R. Co., 53 N.Y. 549; 13 Am. Rep. 545.)" Nor do I perceive the pertinency, as applied to the facts in the case at bar, of the extract made from the opinion of the Supreme Judicial Court of Massachusetts in the case of Whittaker v. Bent, 167 Massachusetts, 588, 589. The doctrine of transitory risk as expounded in the case referred to and in previous cases in Massachusetts which that case followed really amounts only to this, that where the work is of such a character that dangers which cannot be foreseen or guarded against by the master, may in the nature of things suddenly and unexpectedly arise, there is no neglect of a positive duty owing by the master in failing by himself or the agencies he employs to anticipate and protect against that which the utmost care on his part could not have prevented. But this doctrine can have no application to a case like the one in hand, where the damage was occasioned by an act of obvious neglect in the performance of a positive duty. That the doctrine of transitory risk applied in the Massachusetts cases relied upon has no application here, it seems to me is made clear by the fact that it is stated in the certificate that the trains in question were extra trains, obliged by the rules of the company to run on no preordained schedule, and solely under the command of the dispatcher, and that, to quote the certificate, "a large proportion of its freight trains on this division were run as extra trains, and the times of their arrivals and departures were not shown on the regular time tables, but 356 their movements were made upon telegraphic orders issued by the train dispatcher upon information furnished by telegraph to the train dispatcher by its station agents and operators along the line of the railroad." To apply the transitory risk theory to this condition of affairs it seems to me is to say that the method permanently adopted by the company for running the class of trains in question is to be governed, not by that fact, but by the fictitious assumption that the trains were temporarily operated by wire alone. The consequence of the application of the doctrine of transitory risk to the condition of affairs shown in the certificate is, as I understand it, but to say that a railroad which chooses to operate its trains solely through orders of the train dispatcher is a licensed wrongdoer as respects its employes, since thereby it is exempt from those rules of positive duty which the law would otherwise impose. The result is, besides, to decide that if a railroad adopts a regular schedule the law casts a positive duty on it as regards its employes, but that it may escape all such duty on the theory of transitory risk, if only the road elects to adopt no schedule and to operate its trains solely by telegraph. For the foregoing reasons I dissent. I am authorized to say that the CHIEF JUSTICE, MR. JUSTICE HARLAN and MR. JUSTICE McKENNA concur in this dissent.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/96031/	193 U.S. 189 (1904) WINOUS POINT SHOOTING CLUB v. CASPERSEN. No. 153. Supreme Court of United States. Argued February 24, 1904. Decided March 7, 1904. ERROR TO THE SUPREME COURT OF THE STATE OF OHIO. Mr. S.H. Holding, with whom Mr. Harvey D. Goulder and Mr. Frank S. Masten were on the brief, for plaintiff in error. Mr. George A. True for defendants in error. MR. CHIEF JUSTICE FULLER delivered the opinion of the court. This was a suit brought by the Winous Point Shooting Club against Caspersen and others in the Court of Common Pleas, Ottawa County, Ohio, to enjoin defendants from fishing on certain premises alleged to be parts of Sandusky River and Mud Creek and to belong to plaintiff. The court found that the waters in dispute formed part of a public bay, which defendants had the right to navigate and to fish in; and dismissed the petition. The case was then carried to the Circuit Court of Ottawa 190 County and there tried de novo. That court filed findings of fact and conclusions of law; held that the waters in question were not parts of Sandusky River and Mud Creek, and formed part of a public bay, in whose waters defendants as members of the public had the right of navigation and fishing; and the petition was again dismissed. Plaintiff then took the case on error to the Supreme Court of Ohio, and, with other alleged errors not material here, assigned as error that "the judgment of the court is in contravention of section 19, article I, of the constitution of Ohio, and article V of the Constitution of the United States, in that by said judgment the private property of the plaintiff in error is taken for public use without just compensation." There was no suggestion that any right under the Constitution, or any statute of, or authority exercised under, the United States, had been specially set up or claimed, and decided against. The Supreme Court affirmed the judgment of the Circuit Court and entered an order certifying as "part of the record in this case and of the judgment and entry of affirmance heretofore rendered and made herein, that in the prosecution of error to this court from the Circuit Court of Ottawa County, and in the arguments made in this court, in behalf of plaintiff in error, it was insisted and relied upon by said plaintiff that the waters in dispute had been surveyed and meandered by the United States as those of Sandusky River and Muddy Creek, and the lands mentioned and described in said case had been surveyed, sold and patented by the United States to plaintiff's predecessors in title as lands bordering upon said river and creek, all of which acts had been done under authority of acts of Congress; that plaintiff had and possessed the sole and exclusive right of fishing in said waters; that the judgment and decree of the said Circuit Court, that said waters are not those of Sandusky River and Muddy Creek, but those of an open and public bay, in which the public had the rights of fishing, was in contravention of the Constitution of the United States, in that plaintiff was deprived of its private property and the same was taken for a public use, without just 191 compensation to it; and it became material to the determination of said case in this court to determine said question so made by plaintiff in error, which was determined adversely to plaintiff in error, as appears in the entry and judgment of affirmance heretofore made herein." The certificate in itself would not confer jurisdiction, but may properly be referred to, and it appears therefrom as well as from the terms of the assignment of error in the Supreme Court that plaintiff's contention was that the judgment of the Circuit Court was in violation of the Fifth Amendment. But that amendment is a restriction on Federal power, and not on the power of the States. The Supreme Court of Ohio gave no affirmative expression of its views in that regard, or, indeed, in respect of section 19 of article I of the constitution of Ohio, treating of taking private property for public use on compensation made. The judgment was affirmed on the authority of Bodi v. Winous Point Shooting Club, 57 Ohio St. 226. In that case the same waters were in dispute as in this case, and it was held that they formed "part of a public bay and not parts of the Sandusky River and Mud Creek," and the ruling in Sloan v. Biemiller, 34 Ohio St. 492, sustaining the public rights of navigation and fishing, in such circumstances, was followed and approved. Federal questions cannot be raised here which did not arise below, and as the Fifth Amendment had no application the averment of its violation created no real Federal question. Chapin v. Fry, 179 U.S. 127. Writ of error dismissed.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/3281970/	Respondent moves to dismiss the appeal, which was taken from an order denying a motion made by defendant in the trial court under section 663 of the Code of Civil Procedure, namely, a motion in that court to set aside its judgment, amend its conclusions of law, and enter another and different judgment. No appeal has been taken from the judgment. Respondent claims that an order denying a motion to set aside the judgment and to enter Page 363 another and different judgment is not an appealable order. Hence her motion to dismiss this appeal. [1] An order denying a motion made under section 663 is unquestionably a special order made after final judgment, and as such is appealable under section 963 — unless there be some good reason for holding otherwise. Because in section 663a the legislature expressly provided that an order granting such a motion may be reviewed on appeal in the same manner as a special order made after final judgment, respondent argues that, under the familiar rule of construction, expressio uniusest exclusio alterius, it should be held that the lawmakers did not intend that there should be a right of appeal from an orderdenying the motion. To support this view respondent cites ModocCo-operative Assn. v. Porter, 11 Cal.App. 270 [104 P. 710]. It is true that certain dicta may be found in the opinion in that case which seem to give color to respondent's contention; but since that case was decided our supreme court has stated unequivocally that an order denying a motion made under section663 is appealable under section 963, as a special order made after final judgment. (Bond v. United Railroads, 159 Cal. 270 [Ann. Cas. 1912C, 50, 48 L. R. A. (N. S.) 687, 113 P. 366];Condon v. Donohue, 160 Cal. 749 [118 P. 113].) The rule thus announced is binding here. The motion to dismiss the appeal is denied. Works, J., and Craig, J., concurred. A petition for a rehearing of this cause was dismissed by the district court of appeal on December 4, 1923. Page 364	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/102335/	293 U.S. 268 (1934) INDIANA FARMER'S GUIDE PUBLISHING CO. v. PRAIRIE FARMER PUBLISHING CO. ET AL. No. 60. Supreme Court of United States. Argued November 8, 1934. Decided December 3, 1934. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT. 269 Messrs. Eben Lesh and U.S. Lesh for petitioner. Mr. Maxwell V. Beghtol, with whom Messrs. Thomas E. Murphy, Burke G. Slaymaker, and Clarence F. Merrell were on the brief, for respondents. 271 MR. JUSTICE BUTLER delivered the opinion of the Court. Petitioner brought this action against respondents alleging facts upon which it claimed they violated §§ 1 and 2 of the Sherman Act and thereby caused injury to its property and business for which it prayed recovery of three-fold damages under § 7. The respondents answered separately by general denial. At the close of all the evidence they submitted a written motion that the court direct a verdict in their favor. The court granted the motion and entered judgment. The Circuit Court of Appeals affirmed. 70 F. (2d) 3. Section 1 of the Sherman Act denounces "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C., § 1. Section 2 declares: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . . shall be deemed 272 guilty of a misdemeanor." 15 U.S.C., § 2. Section 7 provides: "Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act may sue therefor . . . and shall recover three fold the damages by him sustained, and the costs of suit, including a reasonable attorney's fee." 26 Stat. 210. For a number of years, 1928 to 1932 inclusive, next prior to the commencement of this action, the petitioner and each respondent other than the Midwest Farm Paper Unit, Inc., was a publisher of one or more farm papers. Each is a general, and not a vocational, paper; the larger part of its circulation is in the State where printed; it does not circulate in any substantial number throughout the country as a whole and is called a state or sectional paper in order to distinguish it from publications having a wider and what is referred to as a national circulation. Petitioner publishes weekly "The Indiana Farmer's Guide" at Huntington, Indiana. Its circulation is about 160,000. of which over two-thirds is in Indiana and approximately 50,000 in other States. The respondent Prairie Company publishes in Illinois "The Prairie Farmer" and the "Indiana Edition" of the same, which has a large circulation in Indiana. The Wallace Company publishes in Iowa "Wallace's Farmer and Iowa Homestead." The Wisconsin Company publishes in Wisconsin the "Wisconsin Agriculturist and Farmer." The McKelvie Company publishes in Nebraska "The Nebraska Farmer." The Webb Company publishes in Minnesota "The Farmer and Farm, Stock and Home" and the "Dakota Edition" of the same. Advertising matter carried by each of these publishers includes classified and display or commercial advertisements. The latter only is involved in this case. Each is largely dependent for financial success upon revenue derived from 273 these advertisements. Most of the advertisers are located in States other than those in which the papers are published. About ninety per cent. of petitioner's advertisements comes from points outside Indiana and is obtained by correspondence, traveling solicitors and representatives located in different parts of the country. Advertisers, in order to enable petitioner to print their advertisements as desired, send to it from outside Indiana electrotypes which, after being used, are returned to the advertiser or held subject to his order. The Midwest Unit is an agency incorporated in 1931 and the successor of an organization formed in 1928. Its officers and directors are representatives of the other respondents, which make use of that agency, as similarly use was made of its predecessor, to procure at combination rates identical advertisements to be published in their seven farm papers. The gist of the complaint is that respondents entered into a contract, combination and conspiracy for the purpose of obtaining a monopoly of the farm paper business, including the publication, circulation and distribution of advertisements of peculiar interest to farmers "within the territory covered" by their publications; that in furtherance of this contract, combination and conspiracy they conceived a plan and design calculated to break down and destroy "competition with other farm publications within said territory"; and that in order to effectuate that purpose they agreed upon a combination schedule of advertising rates for all their publications materially below the total of the separate rates of each. There was evidence tending to show: That the combination rate for advertisements in respondents' seven papers was much less than the total of the separate charges for the same advertisements in any six; that respondents acting separately and in concert sought and obtained advertisements 274 for all seven papers at rates much less than the charges would have been for identical advertisements if, omitting the "Indiana Edition" of "The Prairie Farmer." they were published in the other six and in petitioner's "Indiana Farmer's Guide." Thus, at least according to petitioner's contention, it appears that by means of the combination rate, respondents, acting together pursuant to agreement to that end, gave a substantial financial advantage to advertisers choosing the "Indiana Edition" instead of the Farmer's Guide. Petitioner contends that the ground upon which the district court directed the verdict was that its activities were not shown by the evidence to constitute interstate commerce. The record is ambiguous. Respondents' motion did not specify any grounds upon which they claimed to be entitled to the peremptory instruction. There is nothing to indicate the arguments submitted or authorities cited by either party. The court orally instructed the jury: "There has been, in my opinion, a failure on the part of the plaintiff in this case to show that there has been any restraint of trade as between the different states . . . That being true, this court would not have jurisdiction to entertain the case at all, and your finding, under that state of facts, should be for the defendants." Respondents take no issue with the petitioner's assertion of fact. But, impliedly assuming its correctness, they argue that, while petitioner and respondents are engaged in interstate commerce in the circulation of their papers, the subject matter of the suit is not that business but the making of contracts by respondents for the insertion of advertising matter in their papers and that therefore the case is ruled by Blumenstock Bros. v. Curtis Publishing Co., 252 U.S. 436, 438. And they say the trial court did not err in holding that "there can be no restraint 275 or monopoly of interstate commerce when the subject matter of the complaint does not relate to interstate commerce at all." Thus, by a construction of the complaint that is utterly untenable, they support the very basis upon which petitioner maintains the district court rested its decision. Inferentially their contentions go far to show and in the light of all the circumstance we find that the trial court's direction of verdict and its judgment rest solely upon the ground that petitioner failed to introduce evidence that its business or that of respondents included interstate commerce. Blumenstock Bros. v. Curtis Publishing Co., supra, gives no support to that ruling. There, an advertising agency sued a publishing company under § 7 of the Sherman Act for damages alleged to have been caused to the agency by the publisher's violation of § 2. Defendant moved to dismiss on the ground that the complaint did not allege a cause of action within the provisions of the Act. The district court granted the motion and entered judgment dismissing the suit for want of jurisdiction over the defendant or the action, and included in the record, a certificate in accordance with § 238 of the Act of March 3, 1911, 36 Stat. 1157, that the question involved was whether the facts alleged constituted a cause of action under the Act. We said (p. 442): "In the present case . . . the subject-matter dealt with was the making of contracts for the insertion of advertising matter in certain periodicals belonging to the defendant. It may be conceded that the circulation and distribution of such publications throughout the country would amount to interstate commerce, but the circulation of these periodicals did not depend upon or have any direct relation to the advertising contracts which the plaintiff offered and the defendant refused to receive except upon the terms stated in the 276 declaration. The advertising contracts did not involve any movement of goods or merchandise in interstate commerce, or any transmission of intelligence in such commerce. This case is wholly unlike International Textbook Co. v. Pigg, 217 U.S. 91, wherein there was a continuous interstate traffic in textbooks and apparatus for a course of study pursued by means of correspondence, and the movements in interstate commerce were held to bring the subject-matter within the domain of federal control, and to exempt it from the burden imposed by state legislation." And after reviewing earlier decisions the opinion continued (p. 444): "Applying the principles of these cases, it is abundantly established that there is no ground for claiming that the transactions which are the basis of the present suit, concerning advertising in journals to be subsequently distributed in interstate commerce, are contracts which directly affect such commerce." The business that is here alleged to have been damaged is the publication and circulation of these farm papers. That business includes the obtaining of advertising, the transportation between States of electrotypes, sent respectively to petitioner and respondents by their customers to be used in setting up advertisements, and the transportation of substantial quantities of the papers in interstate commerce. Advertising at compensatory rates is an essential element. The opinion in Blumenstock Bros. v. Curtis Publishing Co., supra, assumed that a publishing business such as that now under consideration would amount to interstate commerce. There is no ground for the contention that the evidence in this case is not sufficient to go to the jury on the question of interstate commerce. International Textbook Co. v. Pigg, 217 U.S. 91, 106-107. Pensacola Tel. Co. v. Western Union, 96 U.S. 1, 9-10. Dahnke-Walker Co. v. Bondurant, 257 U.S. 282, 290-291. Di Santo v. Pennsylvania, 273 U.S. 34, 36. Eastman Co. v. Southern Photo Co., 273 U.S. 359, 370, 374. Furst v. Brewster, 282 U.S. 493, 497. Cf. 277 N.Y. Life Ins. Co. v. Deer Lodge County, 231 U.S. 495, 510, et seq. The Circuit Court of Appeals did not consider the ground upon which the district court put the judgment. It impliedly assumed that petitioner's business does include interstate commerce. It accepted the assertion that, due to the combination rate of respondents, petitioner lost commercial advertisers. In decision of the case, the court said (p. 5): "We are, however, not satisfied that appellant has established a fact which rested upon it to prove; viz., that through this combination there was effected such a restraint of interstate commerce as would materially affect the entire farm journal advertising business. Such is the requirement laid down in Standard Oil Co. v. United States, 283 U.S. 163. The facts in that case indicated a much greater control of the gasoline production industry than is present in the case before us. . . . Likewise, it seems the facts in Appalachian Coals, Inc. v. United States, 288 U.S. 344, presented a case of much stronger domination by the combinations that had formed than the one before us . . . we cannot escape the force of appellees' statement `. . . If, as held in Standard Oil Co. v. United States . . . the owners of 55 per cent. of the gasoline in the United States could not by combination obtain a monopoly in violation of the Sherman Act, and if, as held in Appalachian Coals, Inc. v. United States, . . . the owners of 74 per cent. of the coal mined in a certain territory could not obtain a monopoly in violation of the Sherman Act, then how can it be held that 5 out of approximately 300 newspapers can obtain a monopoly of advertising, and how can it be held that newspapers which do only approximately 15 per cent. of the advertising in the farm journal field can obtain a monopoly?' In the face of these two decisions we agree with Judge Baltzell that a proper case for the application of sections 278 1, 2, and 7 of the Sherman Anti-Trust Act was not established." The Circuit Court of Appeals makes the relation between the amount of farm journal advertising controlled by respondents to the total in the entire country a basis of its judgment affirming that of the district court. But the complaint charges restraint and attempt to monopolize only in the territory served by respondents' publications, being five or seven if the Indiana and Dakota editions are separately counted out of a total of 23 papers in that territory.[1] Petitioner claims that during the five-year period respondents' advertisements ranged from 44.37 per cent. to 66.92 per cent. of the total in the territory properly to be taken into account.[2] The record 279 contains no suggestion by respondents or by either court that petitioner's allegations are not sufficient to charge a violation of §§ 1 and 2. Its right to recover does not depend upon the proportion that respondents control of the total farm paper advertisements in the entire country, and it was not required to prove that respondents imposed a restraint or attempted monopolization that would affect all commercial advertisements in all farm papers wherever published or circulated. The provisions of §§ 1 and 2 have both a geographical and distributive significance and apply to any part of the United States as distinguished from the whole and to any part of the classes of things forming a part of interstate commerce. Standard Oil Co. v. United States, 221 U.S. 1, 61. Our decision in Standard Oil Co. v. United States, 283 U.S. 163, has little if any bearing upon the question whether the facts alleged in the complaint and supported by the evidence in this case reasonably may be held to constitute a violation of § 1 or § 2. That was a suit for injunction, § 4, to prevent an alleged combination from creating a monopoly or restraining interstate commerce by control of the part of gasoline produced by cracking. The district court granted some of the relief sought. The case came here on defendants' appeal. Slight notice of the principal features of the case is sufficient to distinguish it from the one now before us. Three producers, owning patents for cracking by which the yield of gasoline is greatly increased, joined with the owner of similar patents in agreements for the exchange of patent rights and division of royalties, which were challenged by the Government as a violation of the Act, chiefly upon the ground that they enabled the parties to the agreement to maintain existing royalties. Cracked gasoline is not distinguishable from the straight run. They are mixed or sold interchangeably. The output of cracked gasoline was about 26 per cent. of the total. The record did not show 280 the production of cracked by licensees. It was not shown that by agreeing on royalties defendants could control price or supply. We held that the United States was not entitled to any relief and reversed the decree of the district court. Appalachian Coals, Inc. v. United States, 288 U.S. 344, was brought here on appeal from a decree of the district court granting an injunction against a combination of producers of bituminous coal, in a suit by the United States under the Sherman Act. It may be taken for present purposes that the defendants' production was 74.4 per cent. of the total in the territory in which they operated. But this was only about 12 per cent. of the production east of the Mississippi. It was shown that relatively little bituminous coal is consumed in the district in which the defendants operate mines. They marketed most of their coal in highly competitive territory. We held, in view of the conditions disclosed by the record, that there was no basis for concluding that competition anywhere would be injuriously affected by the cooperative plan adopted by the combination, and reversed the decree. The Circuit Court of Appeals, while recognizing that "there are essential fact differences which make comparisons of different industries of little value," rested its judgment upon respondents' arguments based upon these cases. But the abridged statements of issues there involved and decided are sufficient to show that respondents' contention reflected inadequate ascertainment and appreciation of the facts and considerations there held controlling, and that these decisions turned upon the Government's failure to prove restraint of competition, and that they are not in point here. It results, therefore, that the ground on which the Circuit Court of Appeals rested its judgment cannot be sustained. 281 Petitioner sought this writ upon the ground that the Circuit Court of Appeals held it bound to prove that respondents effected such a restraint of interstate commerce as would materially affect the farm journal advertising business in the entire country and misapplied our decisions in the Standard Oil Company case and the Appalachian Coals case. Respondents had opportunity here to show that, although given on untenable grounds, the judgment below is right and should be affirmed. And, if by the record they could so demonstrate, this court, if satisfied beyond doubt that it could do so without prejudice to petitioner, properly might refrain from reversal. Deery v. Cray, 5 Wall. 795, 807. Vicksburg & Meridian Railroad v. O'Brien, 119 U.S. 99, 103. Peck v. Heurich, 167 U.S. 624, 629. But respondents suggest nothing to justify the direction of verdict and judgment in their favor. Certainly, in the absence of a claim on their part that, conceding the errors exposed by this opinion, the judgment is right, we will not examine the record to discover grounds to sustain it. Cf. Chicago, M. & St. P. Ry. Co. v. Tompkins, 176 U.S. 167, 179. Hammond v. Schappi Bus Line, 275 U.S. 164, 170 et seq. We intimate no opinion whether, upon the question of restraint or monopoly, or upon the question of injury to petitioner or its business, the evidence is sufficient to warrant a verdict in its favor. The judgment of the Circuit Court of Appeals should be reversed and the case remanded to the district court with directions that petitioner be granted a new trial. Reversed. NOTES [1] The petition contains the following computation to show the number and type of farm papers published in the eight states in which petitioner's and respondents' papers principally circulate: --------------------------------------------------------------------------- \| Total Number General \| Vocational or \| of Papers \| Technical -----------------------------------\|----------------------\|---------------- Illinois _________________________ \| 36 \| 5 \| 31 Indiana _________________________ \| 10 \| 4 \| 6 Iowa _____________________________ \| 10 \| 5 \| 5 Minnesota ________________________ \| 8 \| 2 \| 6 Nebraska _________________________ \| 3 \| 1 \| 2 North Dakota _____________________ \| 1 \| 0 \| 1 South Dakota _____________________ \| 1 \| 1 \| 0 Wisconsin ________________________ \| 8 \| 5 \| 3 \|-------------\|--------\|---------------- Total _____________________ \| 77 \| 23 \| 54 --------------------------------------------------------------------------- [2] Petitioner's computation follows: --------------------------------------------------------------------------- \| Total Lineage \| Total Lineage \| Per Cent of \| Carried by all \| Carried by \| Respondents' \| Papers \| Respondents' \| Lineage to \| \| Papers \| Total ----------------------------\|----------------\|---------------\|-------------- 1928 ______________________ \| 7,490,806 \| 3,323,256 \| 44.37 1929 ______________________ \| 6,844,629 \| 3,235,364 \| 47.26 1930 ______________________ \| 5,172,535 \| 2,980,963 \| 57.63 1931 ______________________ \| 3,562,695 \| 2,207,650 \| 61.97 1932 ______________________ \| 2,151,376 \| 1,439,753 \| 66.92 ----------------------------------------------------------------------------	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/102589/	297 U.S. 129 (1936) MANHATTAN GENERAL EQUIPMENT CO. v. COMMISSIONER OF INTERNAL REVENUE.[] No. 226. Supreme Court of United States. Argued January 8, 1936. Decided February 3, 1936. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT. 130 Mr. Laurence Graves, with whom Messrs. Emil Weitzner, Samuel H. Kaufman, Brode B. Davis, and Isadore Polier were on the brief, for petitioners. Assistant Solicitor General Bell, with whom Solicitor General Reed, Assistant Attorney General Wideman, and Messrs. Sewall Key, Joseph M. Jones, and John R. Benney were on the brief, for respondent. MR. JUSTICE SUTHERLAND delivered the opinion of the Court. These cases involve identical facts and questions of law, and were disposed of by the court below in one opinion. 76 F. (2d) 892. The facts, so far as they concern the question here, are taken from the statement of that court. "The petitioners are affiliates of United Brokerage Company. That corporation filed income tax returns for itself and its affiliates for 1925 and 1926 and the petitioners seek to review tax deficiencies attributed to them by the Commissioner, which the Board of Tax Appeals has affirmed. . . . "On June 30, 1925, the United Brokerage Company purchased for $3,414,345.63 in cash all the capital stock of Artemas Ward, Inc., [a New York corporation] that was 131 issued and outstanding, consisting of 4,964 shares of no par value. . . "On December 31, 1925, pursuant to a plan of reorganization, Artemas Ward, Inc. (N.Y.) transferred to Artemas Ward, Inc. (a Delaware corporation), in exchange for 100 shares of stock of the latter company of no par value, all its assets, then of a net book value of $1,246,920.07, with the exception of cash and accounts receivable aggregating $284,967.21; that is to say, the New York corporation transferred to the Delaware corporation assets of the value of $961,952.86. Immediately after the transfer, and on December 31, 1925, Artemas Ward, Inc. (N.Y.) distributed to United Brokerage Company the 100 shares of stock of Artemas Ward, Inc. (Del.) and accounts receivable amounting to $234,967.21. In December, 1926, United Brokerage sold the entire 4,964 shares of Artemas Ward, Inc. (N.Y.) for $49,640. That stock had cost the United Brokerage $3,414,345.63 and the total must be apportioned between the 100 shares of the Delaware corporation (which it still owns) and the 4,964 shares of Artemas Ward, Inc. (N.Y.) in order to determine the loss suffered by the United Brokerage Company through its sale of the 4,964 shares at $49,640. ..... "Upon the reorganization, the New York corporation had left among its assets, valued at $1,246,920.07, accounts receivable and cash aggregating $284,967.21, or approximately 22.85% thereof, after $961,952.86 had been transferred to the Delaware Company. Under Art. 1599 (2) [as amended, infra,] the portion of $3,414,345.63 paid by the United Brokerage Company for the stock of Artemas Ward, Inc. (N.Y.) represented by that stock after the reorganization was $780,303.97. If from this be deducted $234,967.21 accounts receivable and the $49,640 realized from the sale in December, 1926, there 132 would be a loss of $495,696.76. This loss the Commissioner allowed in assessing the income tax for 1925. The second point raised on this appeal is whether the loss, for the year 1926, to which the United Brokerage Company and its affiliates were entitled, was only the sum of $495,696.76 or was the sum of $2,167,785.56 which would arise through deducting from $3,414,345.63, (the cost of the stock of the New York company) the value at the time of the reorganization of the Delaware stock, which was $961,952.86 and $234,967.21 realized from accounts receivable and $49,640 realized from sale of the 4,964 shares." It thus appears, the New York company having parted with all its assets except $50,000 in cash, that the assets behind the 4,964 shares when the 100 share distribution was made consisted of only that sum, while the 100 shares of the Delaware company stock was represented by the transferred assets of the New York company of the value of $961,952.86. The sale of the 4,964 shares brought $49,640; and the simple question to be determined is what method for the purposes of taxation should be employed to determine the loss in respect of the 4,964 shares under the Revenue Act of 1926, § 204 (a) (9), c. 27, 44 Stat. 9, 14, 15. That section provides that the basis for determining the gain or loss from such sale shall be the cost of the property, except that "(9) If the property consists of stock or securities distributed after December 31, 1923, to a taxpayer in connection with a transaction described in subdivision (c) of section 203,[] the basis in the case of the stock in 133 respect of which the distribution was made shall be apportioned, under rules and regulations prescribed by the Commissioner with the approval of the Secretary, between such stock and the stock or securities distributed; . . ." At the time of the reorganization, Article 1599 of Treasury Regulations 69, which had been promulgated on August 28, 1926, was in force. Petitioners invoke subdivision 2 of that regulation which provided: "Where the stock distributed in reorganization is in whole or in part of a character or preference materially different from the stock in respect of which the distribution is made, the cost or other basis of the old shares of stock shall be divided between such old stock and the new stock in proportion, as nearly as may be, to the respective values of each class of stock, old and new, at the time the new shares of stock are distributed, and the basis of each share of stock will be the quotient of the cost or other basis of the class with which such share belongs, divided by the number of shares in the class. The portion of the cost or other basis of the old shares of stock to be attributed to the shares of new stock shall in no case exceed the fair market value of such shares as of the time of their distribution." (Italics added.) April 3, 1928, this regulation was amended by striking from it the italicized portion. The taxpayer contended that its loss should be computed in accordance with the original regulation. This would have resulted in an allocation to the 4,964 shares of the New York corporation of $2,452,392.77; and, after making certain deductions, the allowable loss, as already appears, would have been something over $2,000,000. The commissioner, however, proceeding in strict accordance with the amended regulation, determined the amount of loss to be $495,696.76. Without pursuing the matter in further detail, it is enough to say that the case turns entirely upon the question 134 whether the loss was to be determined in accordance with the original or the amended regulation. If in accordance with the former, the taxpayer is right; if in accordance with the latter, the commissioner is right. The court below held that the amended and not the original regulation furnished the applicable rule, and affirmed the determination of the Board of Tax Appeals, which in turn had sustained the commissioner. We agree with that view. In determining a loss, the statute requires that the basis shall be "apportioned" between the old and the new stock. To apportion is to "divide and assign in just proportion," "to distribute among two or more a just part or share to each," Fisher v. Charter Oak Life Ins. Co., 14 Abb. N.C. 32, 36, albeit, a division may be just without necessarily being also an exactly equal division. The result of applying the original regulation here is to bring about an inequitable apportionment, contrary to the intent of the statute, and to credit the taxpayer with a loss essentially and greatly disproportionate. On the other hand, application of the amended regulation effectuates the legislative intent that the basis of apportionment between the old and the new stock shall result in a fair and just division. The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law for no such power can be delegated by Congress but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity. Lynch v. Tilden Produce Co., 265 U.S. 315, 320-322; Miller v. United States, 294 U.S. 435, 439-440, and cases cited. And not only must a regulation, in order to be valid, be consistent with the statute, but it must be reasonable. 135 International Ry. Co. v. Davidson, 257 U.S. 506, 514. The original regulation as applied to a situation like that under review is both inconsistent with the statute and unreasonable. The contention that the new regulation is retroactive is without merit. Since the original regulation could not be applied, the amended regulation in effect became the primary and controlling rule in respect of the situation presented. It pointed the way, for the first time, for correctly applying the antecedent statute to a situation which arose under the statute. See Titsworth v. Commissioner, 73 F. (2d) 385, 386. The statute defines the rights of the taxpayer and fixes a standard by which such rights are to be measured. The regulation constitutes only a step in the administrative process. It does not, and could not, alter the statute. It is no more retroactive in its operation than is a judicial determination construing and applying a statute to a case in hand. Judgment affirmed. NOTES [] Together with No. 227, Collier Service Corp. v. Commissioner of Internal Revenue. Certiorari to the Circuit Court of Appeals for the Second Circuit. [] Sec. 203 (c) provides: "If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock or securities shall be recognized."	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/103090/	305 U.S. 85 (1938) HINES, ADMINISTRATOR OF VETERANS' AFFAIRS, v. LOWREY, COMMITTEE OF THE PERSON AND ESTATE OF GARMES. No. 24. Supreme Court of United States. Argued October 19, 1938. Decided November 7, 1938. CERTIORARI TO THE SUPREME COURT OF NEW YORK. Mr. Edward E. Odom, with whom Messrs. James T. Brady and Y.D. Mathes were on the brief, for petitioner. Mr. William Dike Reed for respondent. MR. JUSTICE BLACK delivered the opinion of the Court. Section 500 of the World War Veterans' Act[1] (as applicable here) prohibits the recognition of attorneys or 86 claim agents in the presentation or adjudication of veterans' War Risk Insurance claims; limits to ten dollars the payment for assisting in the preparation and execution of an application to the Veterans' Bureau; permits a court rendering a favorable judgment or decree on a veteran's claim to allow the veteran's attorney a fee not to exceed ten per cent of the amount recovered; and makes soliciting or obtaining any fee greater than the statute provides a crime subject to a maximum punishment of a $500 fine and two years imprisonment. A committee (guardian appointed by a New York state court) for an insane veteran retained an attorney to prosecute the rights of the incompetent on a War Risk Insurance contract. The New York court was petitioned for an attorney's fee of $3,000. Upon hearing, it appeared that the attorney had performed services of an investigational 87 and preparatory nature in the prosecution of the veteran's claim; that contrary to § 500, he had been recognized by the Bureau and permitted to join with a representative of the Disabled War Veterans in presenting the claim to the Bureau; and that subsequently, but without litigation, judicial decree or judgment against the Government, the Government paid the guardian an amount in excess of $10,000 on the claim. The New York court allowed a fee of $1,500 for the attorney's services, over the objection of the Administrator of Veterans' Affairs, who intervened and insisted that § 500 prohibited any fee in excess of $10 in this case.[2] We can assume, in the consideration of questions here presented, that valuable services were rendered by the attorney. Respondent seeks to sustain the $1,500 fee upon the theory that the general power of the New York court to fix fees for services rendered an incompetent under that court's jurisdiction is not subject to the limitation of $10 for fees as provided in § 500. He urges that the present case is controlled by the decision in Hines v. Stein, 298 U.S. 94, 98. In that case the Court said, "Nothing brought to our attention would justify the view that Congress intended to deprive state courts of their usual authority over fiduciaries, or to sanction the promulgation of rules to that end by executive officers or bureaus." This language did not refer to § 500, which we now consider, but was a construction and interpretation of rules promulgated by the Administrator of Veterans' Affairs under authority of §§ 4 and 7 of an Act of March 20, 1933, c. 3, 48 Stat. 9, which rules were traceable to §§ 111, 114 and 115, Title 38, U.S.C. These Code sections are based upon an Act passed in 1884. 88 Obviously, the interpretation given rules promulgated in furtherance of a line of legislation dating from 1884 cannot be accepted as controlling in determining the intent and effect of a separate and distinct Act (§ 500) differing in form, substance and historical background. The rules and statutes construed in Hines v. Stein, supra, have no bearing on this case, which must be determined by the application of § 500. Section 500 is one in a series of congressional efforts to limit fees of claim agents and attorneys in the prosecution of veterans' insurance and related claims. Shortly after the United States entered the World War, Congress provided a comprehensive statutory plan of War Risk Insurance for soldiers and sailors.[3] Section 13 of that statute contained this provision: "The Director shall adopt reasonable and proper rules. . ., to regulate the matter of the compensation, if any, but in no case to exceed ten per centum, to be paid to claim agents and attorneys for services in connection with" collection of soldiers' and sailors' benefits. May 20, 1918, Congress amended § 13 of the 1917 Act.[4] The House report shows that this amendment was strongly urged by the Secretary of the Treasury, then administering the World War Veterans' Act.[5] The 1918 89 amendment is substantially the same as § 500, and in a case involving the meaning of that amendment this Court said, "Petitioner claims that the inhibition against receiving any sum greater than three dollars [ten dollars under § 500] relates solely to the clerical work of filling out the form or affidavit of claim, and does not apply to useful investigation and preparatory work such as he did. . . . "We find no reason which would justify disregard of the plain language of the section under consideration. It declares that any person who receives a fee or compensation in respect of a claim under the Act except as therein provided shall be deemed guilty of a misdemeanor. The only compensation which it permits a claim agent or attorney to receive where no legal proceeding has been commenced is three dollars for assistance in preparation and execution of necessary papers. And the history of the enactment indicates plainly enough that Congress did not fail to choose apt language to express its purpose."[6] (Italics supplied.) In 1926, Congress enacted additional legislation for the specific protection of incompetent veterans from illegal or excessive fees where guardians had been appointed by any court state or federal.[7] Congress declared that "whenever it appears that any guardian, curator, conservator or other person, in the opinion of the Administrator, is not properly executing or has not properly executed the duties of his trust or has collected or paid, or is attempting to collect or pay, fees, commissions or allowances that are inequitable or in excess of those allowed by law for the duties performed . . ., then and in 90 that event the Administrator is hereby empowered by his duly authorized attorney to appear in the court which has appointed such fiduciary, . . . and make proper presentation of such matters. . . ."[8] (Italics supplied.) The history of § 500 manifests beyond doubt the clear establishment of a public policy against the payment of fees for prosecution of veterans' claims in excess of those fixed by statute. Collection of a greater fee than that fixed in the statute is made a crime, and this Court has sustained a conviction under the statute.[9] Contracts for the collection of fees in excess of valid statutory limitations and for services validly prohibited by statute cannot stand, whether made with a competent veteran or the guardian of an incompetent veteran. Nor can any court having jurisdiction over an incompetent award a fee in violation of a valid statute. Congress clearly intended to protect all veterans, competent and incompetent, in all courts, state and federal, against the imposition or payment of fees in excess of the amount fixed by statute. In furtherance of this policy the Administrator of Veterans' Affairs was charged with the express duty of appearing in all courts where it appears that "any guardian . . . or other person . . . is attempting to collect fees . . . in excess of those allowed by law." The progressive strengthening of this particular legislative policy precludes any probability that Congress intended to exempt mental incompetents from its protection, and Congress alone is vested with constitutional power to determine the wisdom of this policy. 91 Congressional enactments in pursuance of constitutional authority are the supreme law of the land. Section 500 is a valid exercise of congressional power.[10] "The laws of the United States are laws in the several States, and just as much binding on the citizens and courts thereof as the State laws are."[11] No court has rendered a judgment or decree in favor of the incompetent veteran and against the Government, in which the court as a part of its decree determined and allowed a reasonable fee for the attorney of the veteran. In the absence of such a judgment and decree an attorney's fee of more than $10 is contrary to the controlling congressional enactment. The judgment below being for more than this amount is unauthorized and the cause is Reversed. NOTES [1] "Amount permitted to be paid agents or attorneys; solicitation, etc., of unauthorized fees or compensation; punishment. Except in the event of legal proceedings under section 19, Title I of this Act, no claim agent or attorney except the recognized representatives of the American Red Cross, the American Legion, the Disabled American Veterans, and Veterans of Foreign Wars, and such other organizations as shall be approved by the director shall be recognized in the presentation or adjudication of claims under Parts II, III, and IV, of this Act, and payment to any attorney or agent for such assistance as may be required in the preparation and execution of the necessary papers in any application to the bureau shall not exceed $10 in any one case: Provided, however, That wherever a judgment or decree shall be rendered in an action brought pursuant to section 19 of Title I of this Act, the court, as a part of its judgment or decree, shall determine and allow reasonable fees for the attorneys of the successful party or parties and apportion same if proper, said fees not to exceed 10 per centum of the amount recovered, and to be paid by the bureau out of the payments to be made under the judgment or decree at a rate not exceeding one-tenth of each of such payments until paid. Any person who shall, directly or indirectly, solicit, contract for, charge, or receive, or who shall attempt to solicit, contract for, charge, or receive any fee or compensation, except as herein provided, shall be guilty of a misdemeanor, and for each and every offense shall be punishable by a fine of not more than $500 or by imprisonment at hard labor for not more than two years, or by both such fine and imprisonment." 43 Stat. 628, as amended 43 Stat. 1311, c. 10, 38 U.S.C. 551. [2] The Administrator appealed and the Appellate Division affirmed. 252 A.D. 779; 300 N.Y.S. 603. The Court of Appeals of New York denied the Administrator's motion for leave to appeal. 13 N.E.2d 478. This Court granted certiorari. [3] c. 105, 40 Stat. 398 (October, 1917). [4] c. 77, 40 Stat. 555. [5] House Report No. 471 from the Committee on Interstate and Foreign Commerce, 65th Cong., 2nd Session. A part of the letter of the Secretary of the Treasury contained in the Report was as follows: "The evils of the situation are pressing. Unscrupulous attorneys and claim agents are circularizing prospective claimants . . . The heartlessness and rapacity of these persons knows no bounds. In some instances their break-neck rush for employment has led them to the length of crucifying the wives and mothers of those in the service by false announcements that their husbands or sons have already fallen, and in almost all cases they are seeking to mulct the unwary out of hundreds of dollars for services that are either entirely unnecessary or would be amply remunerated by a nominal fee." The discussions of the amendment in the House by those in charge of the bill were of the same tenor. Congressional Record, Vol. 56, Part 5, 5220-5226. [6] Margolin v. United States, 269 U.S. 93, 101, 102. [7] c: 723, 44 Stat. 792; c. 10, 38 U.S.C. 450. [8] In 1935, Congress added the proviso that ". . . the Administrator is hereby authorized and empowered to appear or intervene by his duly authorized attorney in any court as an interested party in any litigation instituted by himself or otherwise, directly affecting money paid to such fiduciary [guardian] under this section." c. 510, 49 Stat. 607, 608. [9] Margolin v. United States, supra. [10] Margolin v. United States, supra; Calhoun v. Massie, 253 U.S. 170. [11] Claflin v. Houseman, 93 U.S. 130, 136.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/489852/	820 F.2d 1229 Georgesv.I.N.S. 86-6016 United States Court of Appeals,Eleventh Circuit. 5/29/87 1 S.D.Fla. AFFIRMED 2 --------------- Fed.R.App.P. 34(a); 11th Cir.R. 23.	01-03-2023	08-23-2011
https://www.courtlistener.com/api/rest/v3/opinions/110426/	450 U.S. 288 (1981) CARTER v. KENTUCKY. No. 80-5060. Supreme Court of United States. Argued January 14, 1981. Decided March 9, 1981. CERTIORARI TO THE SUPREME COURT OF KENTUCKY. 289 Kevin Michael McNally argued the cause and filed a brief for petitioner. Robert V. Bullock, Assistant Attorney General of Kentucky, argued the cause for respondent. With him on the brief were Steven L. Beshear, Attorney General, and Richard O. Wyatt, Assistant Attorney General. JUSTICE STEWART delivered the opinion of the Court. In this case a Kentucky criminal trial judge refused a defendant's request to give the following jury instruction: "The [defendant] is not compelled to testify and the fact that he does not cannot be used as an inference of guilt and should not prejudice him in any way." The Supreme Court of Kentucky found no error.[1] We granted certiorari to consider the petitioner's contention that a defendant, upon request, 290 has a right to such an instruction under the Fifth and Fourteenth Amendments of the Constitution. 449 U.S. 819.[2] I A In the early morning of December 22, 1978, Officer Deborah Ellison of the Hopkinsville, Kentucky, Police Department, on routine patrol in downtown Hopkinsville, noticed something in the alley between Young's Hardware Store and Edna's Furniture Store. She backed her car up, flashed her spotlight down the alley, and saw two men stooped alongside one of the buildings. The men ran off. Officer Ellison drove her squad car down the alley and found a hole in the side of Young's Hardware Store. She radioed Officer Leroy Davis, whom she knew to be in the area, informing him that two men had fled from the alley. Soon after receiving Ellison's call, Officer Davis saw two men run across a street near where he had been patrolling. The two ran in opposite directions, and Davis proceeded after one of them. Following a chase, during which he twice lost sight of the man he was pursuing, Davis was finally able to stop him. The man was later identified as the petitioner, Lonnie Joe Carter. During the course of the chase, Davis 291 saw the petitioner drop two objects: a gym bag and a radio tuned to a police band. When apprehended, the petitioner was wearing gloves but no jacket. While Davis was pursuing the petitioner, Officer Ellison inspected the alley near the hole in the building wall. She found two jackets, along with some merchandise that had apparently been removed from the hardware store. After arresting the petitioner, Davis brought him to Officer Ellison to see if she could identify him as one of the men she had seen in the alley. Ellison noted that he was of similar height and weight to one of the men in the alley, and that he wore similar clothing, but because it had been too dark to get a good view of the men's faces, she could not make a more positive identification. The petitioner was then taken to police headquarters. B The petitioner was subsequently indicted for third-degree burglary of Young's Hardware Store. The indictment also charged him with being a persistent felony offender, in violation of Ky. Rev. Stat. § 532.080 (Supp. 1980), on the basis of previous felony convictions. At the trial, the voir dire examination of prospective jurors was conducted solely by the judge.[3] The prosecutor's opening statement recounted the 292 evidence expected to be introduced against the petitioner. The opening statement of defense counsel began as follows: "Let me tell you a little bit about how this system works. If you listened to Mr. Ruff [the prosecutor] you are probably ready to put Lonnie Joe in the penitentiary. He read you a bill, a true bill that was issued by the Grand Jury. Now, the Grand Jury is a group of people that meet back here in a room and the defendant is not able or not allowed to present any of his testimony before this group of people. The only thing that the Grand Jury hears is the prosecution's proof and I would say approximately what Mr. Ruff has said to you. I suppose that most of you would issue a true bill if Mr. Ruff told you what he has just told you and you didn't have a chance to hear what the defendant had to say for himself. "Now, that is just completely contrary to our system of law. A man, as the Judge has already told you, . . . is innocent until . . . proved guilty . . . ." The prosecution rested after calling Officers Ellison, Davis, another officer, and the owner of Young's Hardware Store. The trial judge then held a conference, outside of the hearing of the jury, to determine whether the petitioner would testify, and whether the prosecutor would be permitted to impeach the petitioner with his prior felony convictions. Defense counsel stated: "Judge, I think possibly the only reservation Mr. Carter might have about testifying would be his impeachment by the use of these previous offenses that he is aware of and has told me about. I would like to explain to him in front of you what this all means." 293 Counsel then explained to the petitioner that if he testified the Commonwealth could "use the fact that you have several offenses on your record . . . [to] impeach your . . . propensity to tell the truth . . . ." Counsel added that in his experience this was "a heavy thing; it is very serious, and I think juries take it very seriously . . . ." The judge indicated that under Kentucky law he had "discretionary control" over the use of prior felony convictions for impeachment, and cautioned the prosecutor that he might be inviting a reversal if he introduced more than three prior felony convictions, strongly suggesting that the prosecutor rely on the most recent convictions only. The judge then addressed the petitioner: "THE COURT: . . . You can sit there and say nothing and it cannot be mentioned if you don't testify but if you do these other convictions can be shown to indicate to the jury that maybe you are not telling the truth. ..... "THE COURT: . . . [Y]ou talk to Mr. Rogers [defense counsel] and then tell us what you want to do. ..... "THE COURT: Now, Lonnie, you have come back after a private conference with your lawyer, Mr. Rogers[,] and you have told me you have decided not to take the stand? "LONNIE JOE CARTER: Yes, Sir."[4] Upon returning to open court, the petitioner's counsel advised the court that there would be no testimony introduced 294 on behalf of the defense. He then requested that the following instruction be given to the jury: "The [defendant] is not compelled to testify and the fact that he does not cannot be used as an inference of guilt and should not prejudice him in any way." The trial court refused the request. The prosecutor began his summation by stating that he intended to review the evidence "that we were privileged to hear," and cautioned the jury to "[c]onsider only what you have heard up here as evidence in this case and not something that you might speculate happened or could have happened . . . ." After mentioning admissions that the petitioner had allegedly made at police headquarters,[5] the prosecutor argued: "Now that is not controverted whatsoever. It is not controverted that Lonnie Joe is the man that Miss Ellison saw here. It is not controverted that Lonnie Joe is the man that Davis caught up here (again pointing to blackboard sketch). It is not controverted that Lonnie Joe had that bag (pointing to bag on reporter's desk) and that radio (pointing to radio) with him. It is not controverted that both of those jackets belong to Lonnie Joe. At least, that is what he told the police department. But, at any rate, that is all we have to go on . . . ." The prosecutor continued that if there was a reasonable explanation why the petitioner ran when he saw the police, it was "not in the record."[6] 295 The jury found the petitioner guilty, recommending a sentence of two years. The recidivist phase of the trial followed. The prosecutor presented evidence of the previous felony convictions that had been listed in the indictment. The defense presented no evidence, and the jury found the petitioner guilty as a persistent offender, sentencing him to the maximum term of 20 years in prison. Upon appeal, the Kentucky Supreme Court rejected the argument that the Fifth and Fourteenth Amendments to the United States Constitution require that a criminal trial judge give the jury an instruction such as was requested here. In concluding that the trial judge did not commit error by refusing to give the requested instruction, the court pointed to Ky. Rev. Stat. § 421.225 (Supp. 1980), which provides: "In any criminal or penal prosecution the defendant, on his own request, shall be allowed to testify in his own behalf, but his failure to do so shall not be commented upon or create any presumption against him." Holding that the jury instruction requested by counsel would have required the trial judge to "comment upon" the defendant's failure to testify, the court cited its previous decision in Green v. Commonwealth, 488 S.W.2d 339, as controlling. II A The constitutional question presented by this case is one the Court has specifically anticipated and reserved, first in Griffin v. California, 380 U.S. 609, 615, n. 6, and more recently in Lakeside v. Oregon, 435 U.S. 333, 337. But, as a question of federal statutory law, it was resolved by a unanimous Court over 40 years ago in Bruno v. United States, 308 U.S. 287. The petitioner in Bruno was a defendant in a federal criminal 296 trial who had requested a jury instruction similar to the one requested by the petitioner in this case.[7] The Court, addressing the question whether Bruno "had the indefeasible right" that his proffered instruction be given to the jury, decided that a federal statute,[8] which prohibits the creation of any presumption from a defendant's failure to testify, required that the "substance of the denied request should have been granted . . . ." Id., at 294.[9] 297 The Griffin case came here shortly after the Court had held that the Fifth Amendment command that no person "shall be compelled in any criminal case to be a witness against himself" is applicable against the States through the Fourteenth Amendment. Malloy v. Hogan, 378 U.S. 1.[10] In Griffin, the Court considered the question whether it is a violation of the Fifth and Fourteenth Amendments to invite a jury in a state criminal trial to draw an unfavorable inference from a defendant's failure to testify. The trial judge had there instructed the jury that "a defendant has a constitutional right not to testify," and that the defendant's exercise of that right "does not create a presumption of guilt nor by itself warrant an inference of guilt" nor "relieve the prosecution of any of its burden of proof." But the instruction additionally permitted the jury to "take that failure into consideration as tending to indicate the truth of [the State's] evidence and as indicating that among the inferences that may be reasonably drawn therefrom those unfavorable to the defendant are the more probable." 380 U.S., at 610. This Court set aside Griffin's conviction because "the Fifth Amendment . . . forbids either comment by the prosecution on the accused's silence or instructions by the court that such silence is evidence of guilt." Id., at 615.[11] It condemned adverse comment on a defendant's failure to testify as reminiscent of the "`inquisitorial system of criminal justice,'" 298 id., at 614, quoting Murphy v. Waterfront Comm'n, 378 U.S. 52, 55, and concluded that such comment effected a court-imposed penalty upon the defendant that was unacceptable because "[i]t cuts down on the privilege by making its assertion costly." 380 U.S., at 614.[12] The Court returned to a consideration of the Fifth Amendment and jury instructions in Lakeside v. Oregon, 435 U.S. 333, where the question was whether the giving of a "no-inference" instruction over defense objection violates the Constitution. Despite trial counsel's complaint that his strategy was to avoid any mention of his client's failure to testify, a no-inference instruction[13] was given by the trial judge. The petitioner contended that when a trial judge in any way draws the jury's attention to a defendant's failure to testify, unless the defendant acquiesces, the court invades the defendant's privilege against compulsory self-incrimination. This argument was rejected. The Lakeside Court reasoned that the Fifth and Fourteenth Amendments bar only adverse comment on a defendant's failure to testify, and that "a judge's instruction that the jury must draw no adverse inferences of any kind from the defendant's exercise of his privilege not to testify is `comment' of an entirely different order." Id., at 339. The purpose of such an instruction, the Court stated, "is to remove from the jury's deliberations any influence of unspoken adverse inferences," and "cannot provide the pressure on a defendant found impermissible in Griffin." Ibid. 299 The Court observed in Lakeside that the petitioner's argument there rested on "two very doubtful assumptions:" "First, that the jurors have not noticed that the defendant did not testify and will not, therefore, draw adverse inferences on their own. Second, that the jurors will totally disregard the instruction, and affirmatively give weight to what they have been told not to consider at all. Federal constitutional law cannot rest on speculative assumptions so dubious as these." Id., at 340 (footnote omitted). Finally, the Court stressed that "[t]he very purpose" of a jury instruction is to direct the jurors' attention to important legal concepts "that must not be misunderstood, such as reasonable doubt and burden of proof," and emphasized that instruction "in the meaning of the privilege against compulsory self-incrimination is no different." Ibid. B The inclusion of the privilege against compulsory self-incrimination[14] in the Fifth Amendment "reflects many of our fundamental values and most noble aspirations: our unwillingness to subject those suspected of crime to the cruel trilemma of self-accusation, perjury or contempt; . . . our fear that self-incriminating statements will be elicited by inhumane treatment and abuses; our sense of fair play which dictates `a fair state-individual balance by requiring the government . . . , in its contest with the individual to shoulder the entire load,' . . . ; our distrust of self-deprecatory statements; and our realization that the privilege, while sometimes 300 `a shelter to the guilty,' is often `a protection to the innocent.'" Murphy v. Waterfront Comm'n, supra, at 55.[15] The principles enunciated in our cases construing this privilege, against both statutory and constitutional backdrops, lead unmistakably to the conclusion that the Fifth Amendment requires that a criminal trial judge must give a "no-adverse-inference" jury instruction when requested by a defendant to do so. In Bruno, the Court declared that the failure to instruct as requested was not a mere "technical erro[r] . . . which do[es] not affect . . . substantial rights . . . ." It stated that the "right of an accused to insist on" the privilege to remain silent is "[o]f a very different order of importance . . ." from the "mere etiquette of trials and . . . the formalities and minutiae of procedure." 308 U.S., at 293-294. Thus, while the Bruno Court relied on the authority of a federal statute, it is plain that its opinion was influenced by the absolute constitutional guarantee against compulsory self-incrimination.[16] 301 The Griffin case stands for the proposition that a defendant must pay no court-imposed price for the exercise of his constitutional privilege not to testify. The penalty was exacted in Griffin by adverse comment on the defendant's silence; the penalty may be just as severe when there is no adverse comment, but when the jury is left to roam at large with only its untutored instincts to guide it, to draw from the defendant's silence broad inferences of guilt. Even without adverse comment, the members of a jury, unless instructed otherwise, may well draw adverse inferences from a defendant's silence.[17] The significance of a cautionary instruction was forcefully acknowledged in Lakeside, where the Court found no constitutional error even when a no-inference instruction was given over a defendant's objection. The salutary purpose of the instruction, "to remove from the jury's deliberations any influence of unspoken adverse inferences," was deemed so important that it there outweighed the defendant's own preferred tactics.[18] 302 We have repeatedly recognized that "instructing a jury in the basic constitutional principles that govern the administration of criminal justice," Lakeside, 435 U. S., at 342, is often necessary.[19] Jurors are not experts in legal principles; to function effectively, and justly, they must be accurately instructed in the law. Such instructions are perhaps nowhere more important than in the context of the Fifth Amendment privilege against compulsory self-incrimination, since "[t]oo many, even those who should be better advised, view this privilege as a shelter for wrongdoers. They too readily assume that those who invoke it are . . . guilty of crime . . . ." Ullman v. United States, 350 U.S. 422, 426. And, as the Court has stated, "we have not yet attained that certitude about the human mind which would justify us in . . . a dogmatic assumption that jurors, if properly admonished, neither could nor would heed the instructions of the trial court . . . ." Bruno, 308 U. S., at 294.[20] 303 A trial judge has a powerful tool at his disposal to protect the constitutional privilegethe jury instructionand he has an affirmative constitutional obligation to use that tool when a defendant seeks its employment. No judge can prevent jurors from speculating about why a defendant stands mute in the face of a criminal accusation, but a judge can, and must, if requested to do so, use the unique power of the jury instruction to reduce that speculation to a minimum.[21] C The only state interest advanced by Kentucky in refusing a request for such a jury instruction is protection of the defendant: "the requested `no inference' instruction . . . would have been a direct `comment' by the court and would have emphasized the fact that the accused had not testified in his own behalf." Green v. Commonwealth, 488 S. W. 2d, at 341. This purported justification was specifically rejected in the Lakeside case, where the Court noted that "[i]t would be strange indeed to conclude that this cautionary instruction violates the very constitutional provision it is intended to protect." 435 U.S., at 339. Kentucky also argues that in the circumstances of this case the jurors knew they could not make adverse inferences from the petitioner's election to remain silent because they were instructed to determine guilt "from the evidence alone," and because failure to testify is not evidence. The Commonwealth's argument is unpersuasive. Jurors are not lawyers; they do not know the technical meaning of "evidence." 304They can be expected to notice a defendant's failure to testify, and, without limiting instruction, to speculate about incriminating inferences from a defendant's silence. The other trial instructions and arguments of counsel that the petitioner's jurors heard at the trial of this case were no substitute for the explicit instruction that the petitioner's lawyer requested. Although the jury was instructed that "[t]he law presumes a defendant to be innocent," it may be doubted that this instruction contributed in a significant way to the jurors' proper understanding of the petitioner's failure to testify. Without question, the Fifth Amendment privilege and the presumption of innocence are closely aligned. But these principles serve different functions, and we cannot say that the jury would not have derived "significant additional guidance," Taylor v. Kentucky, 436 U.S. 478, 484, from the instruction requested. See United States v. Bain, 596 F.2d 120 (CA5); United States v. English, 409 F.2d 200, 201 (CA3). And most certainly, defense counsel's own argument that the petitioner "doesn't have to take the stand . . . [and] doesn't have to do anything" cannot have had the purging effect that an instruction from the judge would have had. "[A]rguments of counsel cannot substitute for instructions by the court." Taylor v. Kentucky, supra, at 489.[22] Finally, Kentucky argues that because the evidence of petitioner's guilt was "overwhelming and could not be explained," any constitutional error committed by the state courts was harmless. Chapman v. California, 386 U.S. 18. While it is arguable that a refusal to give an instruction similar to the one that was requested here can never be harmless, cf. Bruno, supra, at 293, we decline to reach the issue, because it was not presented to or considered by the Supreme Court of Kentucky. See Sandstrom v. Montana, 442 U.S. 510, 527. 305 III The freedom of a defendant in a criminal trial to remain silent "unless he chooses to speak in the unfettered exercise of his own will" is guaranteed by the Fifth Amendment and made applicable to state criminal proceedings through the Fourteenth. Malloy v. Hogan, 378 U. S., at 8. And the Constitution further guarantees that no adverse inferences are to be drawn from the exercise of that privilege. Griffin v. California, 380 U.S. 609. Just as adverse comment on a defendant's silence "cuts down on the privilege by making its assertion costly," id., at 614, the failure to limit the jurors' speculation on the meaning of that silence, when the defendant makes a timely request that a prophylactic instruction be given, exacts an impermissible toll on the full and free exercise of the privilege. Accordingly, we hold that a state trial judge has the constitutional obligation, upon proper request, to minimize the danger that the jury will give evidentiary weight to a defendant's failure to testify. For the reasons stated, the judgment is reversed, and the case is remanded to the Supreme Court of Kentucky for further proceedings not inconsistent with this opinion. It is so ordered. JUSTICE POWELL, concurring. Although joining the opinion of the Court, I write briefly to make clear that, for me, this result is required by precedent, not by what I think the Constitution should require. The Fifth Amendment, applicable to the States through the Fourteenth, provides that no person "shall be compelled in any criminal case to be a witness against himself." The question in Griffin v. California, 380 U.S. 609 (1965), was whether this proscription was violated if jurors were told that they could draw inferences from a defendant's failure to testify. The Court held that neither the judge nor the prosecutor could suggest that jurors draw such inferences. 306 A defendant who chooses not to testify hardly can claim that he was compelled to testify. The Court also held, nevertheless, that any "penalty imposed by courts for exercising [this] constitutional privilege" cannot be tolerated because "[i]t cuts down on the privilege by making its assertion costly." Id., at 614. JUSTICE STEWART'S dissenting opinion in Griffin, in which JUSTICE WHITE joined, responded persuasively to this departure from the language and purpose of the Self-Incrimination Clause. JUSTICE STEWART wrote: "We must determine whether the petitioner has been `compelled . . . to be a witness against himself.' Compulsion is the focus of the inquiry. Certainly, if any compulsion be detected in the California procedure, it is of a dramatically different and less palpable nature than that involved in the procedures which historically gave rise to the Fifth Amendment guarantee. . . . "I think that the Court in this case stretches the concept of compulsion beyond all reasonable bounds, and that whatever compulsion may exist derives from the defendant's choice not to testify, not from any comment by court or counsel. . . . [T]he jury will, of course, realize th[e] quite evident fact [that the defendant has chosen not to testify], even though the choice goes unmentioned." Id., at 620-621. The one person who usually knows most about the critical facts is the accused. For reasons deeply rooted in the history we share with England, the Bill of Rights included the Self-Incrimination Clause, which enables a defendant in a criminal trial to elect to make no contribution to the fact-finding process. But nothing in the Clause requires that jurors not draw logical inferences when a defendant chooses not to explain incriminating circumstances. Jurors have been instructed that the defendant is presumed to be innocent and that this presumption can be overridden only by 307 evidence beyond a reasonable doubt. California Chief Justice Traynor commented that judges and prosecutors should be able to explain that "a jury [may] draw unfavorable inferences from the defendant's failure to explain or refute evidence when he could reasonably be expected to do so. Such comment would not be evidence and would do no more than make clear to the jury the extent of its freedom in drawing inferences." Traynor, The Devils of Due Process in Criminal Detection, Detention, and Trial, 33 U. Chi. L. Rev. 657, 677 (1966); accord, Schaefer, Police Interrogation and the Privilege Against Self-Incrimination, 61 Nw. U. L. Rev. 506, 520 (1966). I therefore would have joined JUSTICES STEWART and WHITE in dissent in Griffin. But Griffin is now the law, and based on that case the present petitioner was entitled to the jury instruction that he requested. I therefore join the opinion of the Court. JUSTICE STEVENS, with whom JUSTICE BRENNAN joins, concurring. While I join the Court's opinion, I add this comment to emphasize that today's holding is limited to cases in which the defendant has requested that the jury be instructed not to draw an inference of guilt from the defendant's failure to testify. I remain convinced that the question whether such an instruction should be given in any specific caselike the question whether the defendant should testify on his own behalf should be answered by the defendant and his lawyer, not by the State. See Lakeside v. Oregon, 435 U.S. 333, 343-348 (1978) (STEVENS, J., dissenting). JUSTICE REHNQUIST, dissenting. The Court has reached its conclusion in this case by a series of steps only the first of which is traceable to the United States Constitution. Yet since the result of the Court's decision is to reverse the judgment of the Supreme 308 Court of Kentucky, the decision must obviously rest upon the fact that the decision of that court is inconsistent with the United States Constitution. As the Court points out, the constitutional question presented by this case is one the Court has specifically anticipated and reserved, first in Griffin v. California, 380 U.S. 609, 615, n. 6 (1965), and more recently in Lakeside v. Oregon, 435 U.S. 333 (1978). But the Court, with a singular paucity of reasoning, points to the fact that in a case arising in the federal system, a defendant requesting a charge similar to that which petitioner requested here was held by this Court to be entitled to it. The differences, of course, are obvious: In the first place, the case of Bruno v. United States, 308 U.S. 287 (1939), was governed by the federal statute there cited: "The accused could `at his own request but not otherwise be a competent witness. And his failure to make such a request shall not create any presumption against him.' Such was the command of the law-makers. The only way Congress could provide that abstention from testifying should not tell against an accused was by an implied direction to judges to exercise their traditional duty in guiding the jury by indicating the considerations relevant to the latter's verdict on the facts. . . . Concededly the charge requested by Bruno was correct. The Act of March 16, 1878, gave him the right to invoke it." Id., at 292-293. Here, of course, the Act of March 16, 1878, does not attempt to govern the procedures or instructions which shall be given in the trial courts of Kentucky. Therefore the Act of Congress which, in Bruno, was stated to entitle a defendant to a charge that no presumption should arise from his refusal to take the stand, is of no relevance whatever to the Court's decision in this case. If we begin with the relevant provisions of the Constitution, 309 which is where an unsophisticated lawyer or layman would probably think we should begin, we find the provision in the Fifth Amendment stating that "[n]o person . . . shall be compelled in any criminal case to be a witness against himself . . . ." Until the mysterious process of transmogrification by which this Amendment was held to be "incorporated" and made applicable to the States by the Fourteenth Amendment in Malloy v. Hogan, 378 U.S. 1 (1964), the provision itself would not have regulated the conduct of criminal trials in Kentucky. But even if it did, no one here claims that the defendant was forced to take the stand against his will or to testify against himself inconsistently with the provisions of the Fifth Amendment. The claim is rather that in Griffin v. California, supra, the Court, building on the language of the Constitution itself and on Malloy, supra, held that a charge to the effect that any evidence or facts adduced against the defendant which he could be reasonably expected to deny or explain could be taken into consideration by the jury violated the constitutional privilege against compulsory self-incrimination. The author of the present opinion dissented from that holding, stating: "The formulation of procedural rules to govern the administration of criminal justice in the various States is properly a matter of local concern. We are charged with no general supervisory power over such matters; our only legitimate function is to prevent violations of the Constitution's commands." 380 U.S., at 623. But even Griffin, supra, did not go as far as the present opinion, for as that opinion makes clear it left open the question of whether a state-court defendant was entitled as a matter of right to a charge that his refusal to take the stand should not be taken into consideration against him by the jury. The Court now decides that he is entitled to such a charge, and, I believe, in doing so, wholly retreats from the statement in the Griffin dissent that "[t]he formulation of 310 procedural rules to govern the administration of criminal justice in the various States is properly a matter of local concern." The Court's opinion states, ante, at 301, that "[t]he Griffin case stands for the proposition that a defendant must pay no court-imposed price for the exercise of his constitutional privilege not to testify." Such Thomistic reasoning is now carried from the constitutional provision itself, to the Griffin case, to the present case, and where it will stop no one can know. The concept of "burdens" and "penalties" is such a vague one that the Court's decision allows a criminal defendant in a state proceeding virtually to take from the trial judge any control over the instructions to be given to the jury in the case being tried. I can find no more apt words with which to conclude this dissent than those stated by Justice Harlan, concurring in the Court's opinion in Griffin: "Although compelled to concur in this decision, I am free to express the hope that the Court will eventually return to constitutional paths which, until recently, it has followed throughout its history." 380 U.S., at 617. NOTES [1] The per curiam memorandum opinion of the Supreme Court of Kentucky, Carter v. Commonwealth, No. 79-SC-452-MR, May 13, 1980, is unreported. But the court's affirmance order is reported in 598 S.W.2d 763. [2] Kentucky is one of at least five States that prohibit giving such an instruction to the jury. Others are Minnesota, see State v. Sandve, 279 Minn. 229, 232-234, 156 N.W.2d 230, 233-234, but see State v. Grey, 256 N.W.2d 74, 77-78 (the instruction may be necessary in some cases to prevent manifest injustice); Nevada, see Jackson v. State, 84 Nev. 203, 208, 438 P.2d 795, 798, Nev. Rev. Stat. § 175.181 (1979); Oklahoma, see Brannin v. State, 375 P.2d 276, 279-280 (Crim. App.), Hanf v. State, 560 P.2d 207, 212 (Crim. App.); and Wyoming, see Kinney v. State, 36 Wyo. 466, 472, 256 P. 1040, 1042. A few States have a statutory requirement that such an instruction be given to the jury unless the defendant objects. See, e. g., Conn. Gen. Stat. § 54-84 (1958). The majority of the States, by judicial pronouncement, require that a defense request for such a jury instruction be honored. See, e. g., Woodward v. State, 234 Ga. 901, 218 S.E.2d 629. [3] After reading the indictment, and inquiring about possible sources of prejudice, the judge told the venire: "The fact that this man is under a charge or has been indicted has no weight against him as evidence. It is not evidence of his guilt and is not to be considered by you as evidence of his guilt. It is simply a part of the court process which starts, as I have said, the wheels turning to get the case started to be tried. It means nothing more than that. He sits there before you today presumed by the law to be as innocent as anyone else in this courtroom. I want you to fully understand that. Sometimes it is not easy to do, but you are to put out of your mind the fact that he is accused of this crime to the point where you will consider him in any way guilty until and unless the Commonwealth meets its burden and by that I mean the Commonwealth must prove his guilt to your satisfaction beyond a reasonable doubt and if they fail to do that, you should find him not guilty. . . ." [4] Defense counsel summarized his private conversation with his client for the record, observing that "the advice of counsel to Mr. Carter was that in plain terms he was between a rock and hard place . . . ." If the petitioner testified he would be impeached and "if he didn't testify the jury[,] whether Mr. Ruff comment[ed] on it or not would probably use that against him." [5] These included the alleged admission that both jackets found in the alley belonged to him. [6] Defense counsel began his closing argument as follows: "Ladies and Gentlemen of the jury, I am sure you all right now are wondering well what has happened? Why didn't Mr. Carter take the stand and testify? Let me tell you. The judge just read to you that the man is presumed innocent and that it is up to the prosecution to prove him guilty beyond a reasonable doubt. He doesn't have to take the stand in his own behalf. He doesn't have to do anything." [7] Bruno asked the trial judge to instruct the jury as follows: "The failure of any defendant to take the witness stand and testify in his own behalf, does not create any presumption against him; the jury is charged that it must not permit that fact to weigh in the slightest degree against any such defendant, nor should this fact enter into the discussions or deliberations of the jury in any manner." 308 U.S., at 292. [8] Act of Mar. 16, 1878, ch. 37, 20 Stat. 30, now 18 U.S. C. § 3481, which states in pertinent part: "In a trial of all persons . . . [the defendant] shall, at his own request, be a competent witness. His failure to make such a request shall not create any presumption against him." [9] At common law, defendants in criminal trials could not be compelled to furnish evidence against themselves, but they were also not permitted to testify. In the context of the original enactment of the federal statute found dispositive in the Bruno case, this Court commented on the alteration of this common-law rule: "This rule, while affording great protection to the accused against unfounded accusation, in many cases deprived him from explaining [incriminating] circumstances . . . . To relieve him from this embarrassment the law was passed. . . . [He] is by the act in question permitted . . . to testify . . . ." Wilson v. United States, 149 U.S. 60, 65-66. Following enactment of the federal statute, the States followed suit with similar laws. See Dills, The permissibility of Comment on the Defendant's Failure to Testify in His Own Behalf in Criminal Proceedings, 3 Wash. L. Rev. 161, 164-165 (1928); 8 J. Wigmore, Evidence § 2272, p. 427 (J. McNaughton rev. 1961). The issue in Wilson, supra, was whether it was error for the prosecutor to comment adversely on the defendant's failure to testify. The Court unanimously held that it was, observing that "[n]othing could have been more effective with the jury to induce them to disregard entirely the presumption of innocence to which by the law he was entitled . . . ." 149 U.S., at 66. As later in Bruno, however, the Court did not reach any Fifth Amendment issue. [10] The Malloy case overruled Twining v. New Jersey, 211 U.S. 78, and Adamson v. California, 332 U.S. 46, both of which had "adhered to the position that the Federal Constitution does not require the States to accord the Fifth Amendment privilege against self-incrimination." Tehan v. United States ex rel. Shott, 382 U.S. 406, 412. Malloy established that the same standards determine the validity of claims of Fifth Amendment privilege "whether . . . in a state or federal court." 378 U.S., at 11. [11] The Court in the Griffin case expressly reserved decision "on whether an accused can require . . . that the jury be instructed that his silence must be disregarded." 380 U.S., at 615, n. 6. [12] In Tehan v. United States ex rel. Shott, supra, it was decided that Griffin was not to be given retroactive application. [13] The Lakeside trial judge gave the following instruction to the jury: "Under the laws of this State a defendant has the option to take the witness stand in his or her own behalf. If a defendant chooses not to testify, such a circumstance gives rise to no inference or presumption against the defendant, and this must not be considered by you in determining the question of guilt or innocence." 435 U.S., at 335. [14] For the history and development of the privilege, which has its roots in English and American revulsion against the inquisitorial practices of the Star Chamber and High Commission, see L. Levy, Origins of the Fifth Amendment (1968); E. Cleary, McCormick on Evidence § 114 (2d ed. 1972); 8 J. Wigmore, Evidence § 2250 (J. McNaughton rev. 1961). [15] The Court has recognized that there are many reasons unrelated to guilt or innocence for declining to testify: "It is not every one who can safely venture on the witness stand though entirely innocent of the charge against him. Excessive timidity, nervousness when facing others and attempting to explain transactions of a suspicious character, and offences charged against him, will often confuse and embarrass him to such a degree as to increase rather than remove prejudices against him. It is not every one, however honest, who would, therefore, willingly be placed on the witness stand." Wilson v. United States, 149 U. S., at 66. Other reasons include the fear of impeachment by prior convictions (the petitioner's fear in the present case), or by other damaging information not necessarily relevant to the charge being tried, Griffin, 380 U. S., at 615, and reluctance to "incriminate others whom [defendants] either love or fear," Lakeside, 435 U. S., at 344, n. 2 (dissenting opinion). [16] In Griffin, the Court relied on the statutory opinion in Wilson, replacing the words "act" and "statute" with the words "Fifth Amendment." 380 U.S., at 613. The same can be done here with respect to the Court's opinion in Bruno: when "Congress" is replaced with "the Fifth Amendment," "the spirit of the Self-Incrimination Clause is reflected." Griffin, 380 U. S., at 613-614. [17] Indeed, the dissenting opinion in Griffin suggested that more harm may flow from the lack of guidance to the jury on the meaning of the Fifth Amendment privilege than from reasonable comment upon the exercise of that privilege. With specific reference to decisions from Kentucky and one other State, the dissenters observed that "[w]ithout limiting instructions, the danger exists that the inferences drawn by the jury may be unfairly broad." Id., at 623. The Court in Griffin indicated no disagreement with this view. [18] It has been almost universally thought that juries notice a defendant's failure to testify. "[T]he jury will, of course, realize this quite evident fact, even though the choice goes unmentioned. . . . [It is] a fact inescapably impressed on the jury's consciousness." Griffin, supra, at 621, 622 (dissenting opinion). In Lakeside the Court cited an acknowledged authority's statement that "`[t]he layman's natural first suggestion would probably be that the resort to privilege in each instance is a clear confession of crime.'" 435 U.S., at 340, n. 10, quoting 8 J. Wigmore, Evidence § 2272, p. 426 (J. McNaughton rev. 1961). [19] In Taylor v. Kentucky, 436 U.S. 478, the Court held that the Due Process Clause requires that instructions be given on the presumption of innocence and the lack of evidentiary significance of an indictment. The Court recognized that an instruction on the presumption of innocence has a "salutary effect upon lay jurors," and that "the ordinary citizen well may draw significant additional guidance" from such an instruction. Id., at 484. The Court stressed the "purging" effect of the instruction and the need to protect "the accused's constitutional right to be judged solely on the basis of proof adduced at trial." Id., at 486. The same can be said, of course, with respect to the privilege of remaining silent. Indeed, the claim is even more compelling here than in Taylor, where the dissenting opinion noted that "the omission [in Taylor's trial] did not violate a specific constitutional guarantee, such as the privilege against compulsory self-incrimination." Id., at 492 (STEVENS, J.) (footnote omitted). [20] "It is obvious that under any system of jury trials the influence of the trial judge on the jury is necessarily and properly of great weight, and that his lightest word or intimation is received with deference, and may prove controlling." Starr v. United States, 153 U.S. 614, 626. For modern empirical support of this longstanding assumption, see Reed, Jury Simulation: The Impact of Judge's Instructions and Attorney Tactics on Decisionmaking, 71 J. Crim. L. & C. 68 (1980); Bridgeman & Marlowe, 64 J. Applied Psychology 91 (1979); Cornish & Sealy, Juries and the Rules of Evidence, 1973 Crim. L. Rev. 208, 217-218, 222; Forston, Judge's Instructions: A Quantitative Analysis of Jurors' Listening Comprehension, 18 Today's Speech No. 4, p. 34 (1970). [21] The importance of a no-inference instruction is underscored by a recent national public opinion survey conducted for the National Center for State Courts, revealing that 37% of those interviewed believed that it is the responsibility of the accused to prove his innocence. 64 A. B. A. J. 653 (1978). [22] See n. 20, supra.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/4020521/	NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 1 2016 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT UNITED STATES OF AMERICA, No. 15-10503 Plaintiff-Appellee, D.C. No. 4:08-cr-00461-PJH v. MEMORANDUM* PENG XIANG LI, a.k.a. Sgt. Stephen, Defendant-Appellant. Appeal from the United States District Court for the Northern District of California Phyllis J. Hamilton, Chief Judge, Presiding Submitted July 26, 2016** Before: SCHROEDER, CANBY, and CALLAHAN, Circuit Judges. Peng Xiang Li appeals pro se from the district court’s order denying his motion for a sentence reduction under 18 U.S.C. § 3582(c)(2). We have jurisdiction under 28 U.S.C. § 1291, and we affirm. Li contends that he is entitled to a sentence reduction under Amendment 782 * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). to the Sentencing Guidelines. We review de novo whether a district court had authority to modify a sentence under section 3582(c)(2). See United States v. Paulk, 569 F.3d 1094, 1095 (9th Cir. 2009). Li is not entitled to a sentence reduction because his sentence was not “based on a sentencing range that has subsequently been lowered by the Sentencing Commission.” 18 U.S.C. § 3582(c)(2). Rather, his sentence was based on the statutory mandatory minimum under 21 U.S.C. § 841(b)(1)(A)(vii). Accordingly, the district court properly denied relief. See U.S.S.G. § 1B1.10 cmt. n.1(A); Paulk, 569 F.3d at 1095. AFFIRMED. 2 15-10503	01-03-2023	08-01-2016
https://www.courtlistener.com/api/rest/v3/opinions/1428821/	832 F.Supp. 1540 (1993) Terry B. NAZON, Plaintiff, v. SHEARSON LEHMAN BROTHERS, INC., Defendant. No. 92-7172-CIV. United States District Court, S.D. Florida. September 17, 1993. 1541 Stuart A. Rosenfeldt, Hertzfeld & Rubin, Miami, FL, for plaintiff. David E. Otero, Gavin S. Appleby, Karen A. Ibach, Mahoney Adams & Criser, P.A., Jacksonville, FL, for defendant. ORDER GONZALEZ, District Judge. THIS CAUSE has come before the Court upon the defendant's Motion to Compel Arbitration. This motion has been fully briefed and is now ripe for ruling. Introduction This action was brought by the plaintiff, Terry B. Nazon, against her former employer, Shearson Lehman Brothers, Inc. Her complaint, which is brought under the Florida Human Rights Act of 1977, as amended, Fla.Stat. § 760.10 et seq., and Florida tort law, alleges sexual harassment, invasion of privacy, and intentional infliction of emotional distress. The defendant has filed a motion to compel arbitration, arguing that the parties entered into an arbitration agreement which requires arbitration of this dispute between them. This agreement, which is entitled "Uniform Application for Securities Industry Registration or Transfer," provides as follows: I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register. ... One such organization with which the plaintiff registered is the National Association of Securities Dealers ("NASD"). The NASD Code of Arbitration mandates that any dispute, claim or controversy arising between or among members will be arbitrated upon the demand of any party. The defendant, Shearson Lehman Brothers, Inc., is also a member of the NASD. The plaintiff and the defendant are also members of the New York Stock Exchange ("NYSE"), which has similar arbitration requirements. NYSE Rule 347 provides: "[a]ny controversy between a registered representative and any member or member organization arising out of the employment or termination of employment of such registered representative by and with such member organization shall be settled by arbitration at the instance of any such party...." Whereas the instant controversy is required to be arbitrated by the rules of these two organizations, the defendant contends that the plaintiff's claims are covered by the parties' arbitration agreement, and must therefore be settled by arbitration. Discussion The Arbitration Act provides that written agreements to arbitrate controversies arising out of an existing contract "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 1241, 84 L.Ed.2d 158 (1985). "By its terms, the Act leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, at 218, 105 S.Ct. at 1241. A district court's duty to enforce an arbitration agreement is not diminished when a party to such an agreement asserts a statutory claim. See Shearson/American 1542 Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). As the Supreme Court has recently held in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), there is no exception to this rule for statutory civil rights claims. In Gilmer, the plaintiff brought suit against his former employer alleging violations of the Age Discrimination in Employment Act (ADEA). Gilmer, at ___, 111 S.Ct. at 1651. As in this case, the plaintiff and the defendant were both members of the New York Stock Exchange, and the plaintiff had signed the Uniform Application for Securities Industry Registration or Transfer. Id., at ___ - ___, 111 S.Ct. at 1650-51. Noting that Congress had not evinced a specific intention to preclude waiver of judicial remedies, the Supreme Court held that claims under the ADEA are arbitrable. Id., at ___ - ___, 111 S.Ct. at 1652-57. Following the Supreme Court's lead in Gilmer, the Eleventh Circuit recently held that an employee's Title VII and pendent state law claims were subject to arbitration, because she had signed an agreement identical to the one in this case, and was a member of the NASD and the New York Stock Exchange. Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698 (11th Cir.1992). The plaintiff does not dispute the similarity between these cases and the instant case. However, she argues that these authorities are not binding on this Court, because they do not address the question of whether state statutory claims are subject to arbitration. The plaintiff has not provided any indication that the Florida legislature specifically intended to preclude waiver of judicial remedies for violations of the Florida Human Rights Act. Instead, she argues that arbitration of her claims would violate Florida's strong public policy against sexual harassment in the workplace. In support of this contention, the plaintiff cites Byrd v. Richardson-Greenshields Securities, Inc., 552 So.2d 1099 (Fla.1989), which held that the exclusivity rule of the worker's compensation statute did not apply to sexual harassment claims. However, her reliance on Byrd is inapposite. In Byrd, the Supreme Court of Florida held that state and federal public policy would be abrogated if an employer could be completely shielded from tort liability based on incidents of sexual harassment. Byrd, at 1104. In this case, compulsory arbitration will not prevent the plaintiff from bringing her claims; it will merely require that these claims be pursued in a different forum. If the arbitration proceedings are somehow legally deficient, she may return to federal court for review. See Bender, supra, at 700; Gilmer, supra, 500 U.S. at ___, 111 S.Ct. at 1654. The plaintiff also argues that the Court, if it finds that the plaintiff's claim must be arbitrated, should nevertheless deny the particular relief sought by the defendant. She argues that the Court should not order the plaintiff to initiate arbitration proceedings, but instead order the defendant to initiate arbitration. According to the plaintiff, it is unfair to force the plaintiff to bear the expenses of initiating arbitration proceedings in order to pursue her civil rights claims. Although the result may seem unfair, the Rules of the NASD and the NYSE both require that the plaintiff initiate arbitration proceedings and pay the required fees. Section 25 of the NASD Code provides in pertinent part: (a) The Claimant shall file with the Director of Arbitration an executed Submission Agreement, a Statement of Claim of the controversy in dispute, together with the documents in support of the Claim and the required deposit.... The Statement of Claim shall specify the relevant facts and the remedies sought. N.A.S.D. Manual (CCH) ¶ 3725. In addition, Section 25(b) of the Code provides that the respondent is required to file an answer to the statement of claim, specifying all available defenses and relevant facts that will be relied upon at hearing. Relevant provisions of the NYSE Rules are identical to those of the NASD Code. See New York Stock Exchange Guide (CCH) ¶ 2612. Thus, the *1543 NASD Code and the NYSE rules clearly provide for initiation of arbitration by the party asserting a claim. Since the plaintiff agreed to abide by the rules of these organizations, she must initiate arbitration proceedings if she wishes to pursue her claims against the defendant. As the plaintiff herself points out, however, Section 44(a) of the NASD Code implies that filing fees may be waived by the Director of Arbitration. If the plaintiff is unable to afford these filing fees, it would be in her best interest to request such a waiver. However, should this request be denied, or should she have any other dispute with these organizations concerning assessment of fees, this Court is without jurisdiction to hear any such dispute; she must first pursue it in arbitration. See Caporale v. National Association of Securities Dealers, Inc., 1991 WL 281890, 1 (D.N.J.). Accordingly, having reviewed the motion and the record, and being otherwise duly advised, it is hereby: ORDERED and ADJUDGED that the defendant's Motion to Compel Arbitration is hereby GRANTED. The above-styled cause shall be STAYED pending the completion of arbitration proceedings. This case shall be CLOSED, to be re-opened, if necessary, upon a motion by either party. DONE AND ORDERED.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2986262/	Order filed August 8, 2013 In The Fourteenth Court of Appeals ____________ NO. 14-13-00549-CR ____________ JOSEPH WAYNE PATTERSON, Appellant V. THE STATE OF TEXAS, Appellee On Appeal from the 239th District Court Brazoria County, Texas Trial Court Cause No. 68941 ORDER Appellant is represented by retained counsel, Veronica L. Davis. No reporter’s record has been filed in this case. Ida H. Salinas, the official court reporter for the 239th District Court, informed this court that appellant had not made arrangements for payment for the reporter’s record. On July 10, 2013, the clerk of this court notified appellant that we would consider and decide those issues that do not require a reporter’s record unless appellant, within 15 days of notice, provided this court with proof of payment for the record. See Tex. R. App. P. 37.3(c). Appellant filed no reply. Accordingly, we issue the following order: We ORDER appellant=s retained counsel, Veronica L. Davis, to file a brief in this appeal on or before September 9, 2013. If Veronica L. Davis does not timely file the brief as ordered, the appeal will be abated for a hearing in the trial court to determine the reason for the failure to file the brief. See Tex. R. App. P. 38.8(b)(2). PER CURIAM	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/1435818/	584 F.3d 821 (2009) Susan Lee BARKER, Plaintiff-Appellant, v. RIVERSIDE COUNTY OFFICE OF EDUCATION, Defendant-Appellee. No. 07-56313. United States Court of Appeals, Ninth Circuit. Argued and Submitted December 12, 2008. Filed October 23, 2009. 822 Janice S. Cleveland, Law offices of Janice S. Cleveland, Riverside, CA, and Gary S. Bennett, Law Offices of Gary S. Bennett, Laguna Hills, CA, for the plaintiff-appellant. Jennifer D. Cantrell and Mark W. Thompson, Atkinson, Andelson, Loya, Ruud & Romo, Riverside, CA, for the defendant-appellee. Before: HARRY PREGERSON and D.W. NELSON, Circuit Judges, and JAMES K. SINGLETON,[] Senior District Judge. PREGERSON, Circuit Judge: Susan Lee Barker was employed by the Riverside County Office of Education as a Resource Specialist Program teacher for students with disabilities. She brought suit against her employer based on constructive termination arising out of an intolerable work environment. Barker's complaint alleged that her supervisors at the Riverside County Office of Education 823 retaliated against her after she voiced concerns that the Riverside County Office of Education was not complying with requirements of federal and state law in how it provided educational services to its disabled students. The district court dismissed Barker's lawsuit for lack of standing. Barker argues that she has standing to sue the Riverside County Office of Education pursuant to the anti-retaliation provisions of both section 504 of the Rehabilitation Act of 1973 and Title II of the Americans with Disabilities Act ("ADA"). We agree with Barker and therefore reverse and remand. I. Background Barker was employed as an itinerant Resource Specialist Program teacher for students with disabilities within the Alternative Education Program of the Riverside County Office of Education from May 13, 2002 through August 1, 2006. Indeed, Barker was the most experienced special education teacher at the Riverside County Office of Education. Barker was regularly asked by other teachers to interpret educational test results, and she received three or four telephone calls per day from her colleagues requesting her opinion and assistance in regard to special education issues with students. Beginning as early as 2003, Barker voiced concerns to her supervisors that the special education services provided by the Riverside County Office of Education to its disabled students were noncompliant with federal and state law. In May 2005, Barker and a coworker filed a class discrimination complaint with the U.S. Department of Education's Office for Civil Rights. The class discrimination complaint filed with the Office for Civil Rights alleged that the Riverside County Office of Education denied its disabled students a free appropriate public education that they are entitled to receive under federal and state law. In June 2005, Barker's supervisors at the Riverside County Office of Education first learned that Barker filed the class discrimination complaint with the U.S. Department of Education's Office for Civil Rights. In the constructive termination action now before us, Barker alleges that her supervisors then retaliated against her throughout the following school year by 1. intimidating Barker for filing the class discrimination complaint with the Office for Civil Rights; 2. failing to respond to Barker's emails and phone calls; 3. excluding Barker from important staff meetings; 4. changing Barker's work assignments to sites further from her home; 5. reducing Barker's caseload even though the Riverside County Office of Education's Alternative Education's disabled student population increased; and 6. refusing to allow Barker to fill in for other teachers during their vacations. Barker further alleged that she was constructively terminated on August 1, 2006 because her supervisors subjected her to an intolerable work environment. On July 13, 2005, Barker submitted a written complaint to the U.S. Department of Education's Office for Civil Rights, alleging that the Riverside County Office of Education retaliated against her for advocating on behalf of her students with disabilities and for filing a complaint with the Office for Civil Rights. The Office for Civil Rights subsequently conducted an investigation into Barker's complaint by gathering evidence through interviews with Barker and fifteen current and former Riverside County Office of Education 824 staff and administrators, and reviewing documents and records submitted by Barker and the Riverside County Office of Education. On June 16, 2006, the Office for Civil Rights determined that the "preponderance of the evidence showed that [the Riverside County Office of Education] retaliated against [Barker] in violation of Section 504[and] Title II...." The Office for Civil Rights further stated that "[a]dvocacy on behalf of disabled students on issues related to their civil rights, and the filing of [Office for Civil Rights] complaints, are protected activities under Section 504 and Title II." Barker then filed a complaint in federal district court contending that the Riverside County Office of Education violated the anti-retaliation provisions of both § 504 of the Rehabilitation Act of 1973 and Title II of the Americans with Disabilities Act by retaliating against her after she advocated on behalf of her students with disabilities. In August 2007, following the Riverside County Office of Education's Fed.R.Civ.P. 12(b)(6) motion, the district court found that Barker did not have standing to sue under either statute and dismissed her claim with prejudice. Barker timely appealed. II. Standard of Review The district court's dismissal of an action pursuant to Fed.R.Civ.P. 12(b)(6) is reviewed de novo. Zimmerman v. Or. Dep't of Justice, 170 F.3d 1169, 1172 (9th Cir.1999). "Because this is an appeal from the dismissal of an action pursuant to Fed. R.Civ. P. 12(b)(6), we accept as true the facts alleged in the complaint." Id. at 1171. Moreover, we must draw inferences in the light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974). III. Discussion A. Section 504 of the Rehabilitation Act of 1973 Barker contends that she has standing[1] to sue her employer, the Riverside County Office of Education, for retaliating against her pursuant to section 504 of the Rehabilitation Act. She argues that section 504 grants standing to individuals who are retaliated against for attempting to protect the rights of disabled people, even if they themselves are not disabled. The Riverside County Office of Education, however, argues that because Barker failed to allege that she was a "qualified individual with a disability," see 29 U.S.C. § 794(a), she cannot avail herself of the Rehabilitation Act's protection against retaliation. According to the Riverside County Office of Education, Section 504 was not "intended to provide redress of employment claims for persons who [are] neither disabled themselves, nor have any close relationship to a disabled person." Contrary to the Riverside County Office of 825 Education's arguments, we find that the anti-retaliation provision of section 504 grants standing to non-disabled people who are retaliated against for attempting to protect the rights of the disabled. In determining whether Barker has standing under section 504, we begin by examining the statute's plain meaning. See Molski v. M.J. Cable, Inc., 481 F.3d 724, 732 (9th Cir.2007). When "the statutory language is clear and consistent with the statutory scheme at issue, the plain language of the statute is conclusive and the judicial inquiry is at an end." Id. Section 504(a) states: No otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.... 29 U.S.C. § 794(a) (codifying Section 504). Section 504 incorporates the anti-retaliation provision of Title VI of the Civil Rights Act of 1964 by providing that: The remedies, procedures, and rights set forth in title VI of the Civil Rights Act of 1964 . . . shall be available to any person aggrieved by any act or failure to act by any recipient of Federal assistance.... 29 U.S.C. § 794a(2) (emphasis added).[2] The anti-retaliation provision of Title VI of the Civil Rights Act incorporated by section 504 states: No recipient or other person shall intimidate, threaten, coerce, or discriminate against any individual for the purpose of interfering with any right or privilege secured by Section 601 of [the Civil Rights] Act or this part, or because he has made a complaint, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this part. 34 C.F.R. § 100.7(e) (emphasis added). This regulation applies to all rights secured by the Rehabilitation Act pursuant to 34 C.F.R. § 104.61. In other words, the anti-retaliation provision in Title VI of the Civil Rights Act has been incorporated by the Rehabilitation Act so as to extend the Rehabilitation Act's protections to "`any individual' who has been intimidated, threatened, coerced, or discriminated against `for the purpose of interfering with[protected rights]' under Title VI of the Civil Rights Act or the Rehabilitation Act." Weber, 212 F.3d at 48 (quoting 34 C.F.R. § 100.7(e)) (citing § 104.61) (granting standing under section 504 of the Rehabilitation Act to a mother who claimed the school system had retaliated against her personally for attempting to enforce her disabled child's rights). Contrary to the Riverside County Office of Education's arguments, the broad statutory language in section 504 and its corresponding anti-retaliation provision in Title VI of the Civil Rights Act does not demonstrate that Congress intended to limit standing under section 504 to only those with disabilities.[3] Section 504 and its anti-retaliation provision use the all-inclusive 826 phrases "any person aggrieved" and "any individual," and no language further limits who "any person aggrieved" or "any individual" may be. In particular, the statutes do not include language requiring such individuals to have disabilities in order to have standing. Nor do they require the protected individual to have any "close relationship to a disabled person," as argued by the Riverside County Office of Education. Indeed, the use of "such broad language" in the statutes "evinces a congressional intention to define standing to bring a private action under 504 ... as broadly as is permitted by Article III of the Constitution." Innovative Health Sys., Inc. v. City of White Plains, 117 F.3d 37, 47 (2nd Cir.1997) (internal quotation marks omitted) (citing Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972) (holding that the term "aggrieved person" in section 810(a) of the Fair Housing Act demonstrated Congress's "intention to define standing as broadly as is permitted by Article III of the Constitution")) (holding that a drug and alcohol rehabilitation center had standing pursuant to section 504 of the Rehabilitation Act to sue a city for discriminatory motives in denying a building permit). Such reasoning is consistent with Congress's statutory goal to protect the rights of the disabled. While "Congress could have limited the remedial provisions of the Rehabilitation Act to claims brought by or on behalf of disabled individuals, it did not do so in apparent recognition of the fact that disabled individuals may need assistance in vindicating their rights...." Weber, 212 F.3d at 49. Indeed, empathetic people who teach and interact frequently with the disabled are those most likely to recognize their mistreatment and to advocate on their behalf. Furthermore, while not controlling authority, it is persuasive that after completing an investigation into Barker's complaint, the Department of Education's Office for Civil Rights concluded that "[a]dvocacy on behalf of disabled students on issues related to their civil rights, and the filing of [Office for Civil Rights] complaints, are protected activities under Section 504 and Title II."[4]See Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944) (holding that "while[non-binding agency opinions are] not controlling upon the courts by reason of their authority, [these opinions] do constitute a body of experience .... that give [them] power to persuade, if lacking power to control"); see also Garcia-Quintero v. Gonzales, 455 F.3d 1006, 1014 (9th Cir.2006). Accordingly, we find that the district court erred in its determination that Barker lacked standing under section 504, and we reverse. B. Title II of the Americans with Disabilities Act Barker contends that she also has standing to sue the Riverside County Office of 827 Education under Title II of the Americans with Disabilities Act ("ADA"). Again, the Riverside County Office of Education alleges that Barker does not have standing to sue under Title II because Barker is not a "qualified individual with a disability." See 42 U.S.C. § 12132. We find that Barker does have standing under Title II for the same reasons that she has standing under section 504 of the Rehabilitation Act. Cf. Innovative Health Sys., 117 F.3d at 46-48 (holding that a drug and alcohol rehabilitation center had standing to sue the city of White Plains for its discriminatory motives in denying the center a building permit under Title II of the ADA). We begin by examining whether the plain meaning of the language used in Title II of the ADA and its anti-retaliation provisions grant standing to non-disabled individuals who are retaliated against for attempting to protect the rights of the disabled. See Molski, 481 F.3d at 732. Title II of the ADA provides: Subject to the provisions of this subchapter, no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity. 42 U.S.C. § 12132. The anti-retaliation provisions of Title II of the ADA state: (a) No private or public entity shall discriminate against any individual because that individual has opposed any act or practice made unlawful by this part, or because that individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under the Act or this part. (b) No private or public entity shall coerce, intimidate, threaten, or interfere with any individual in the exercise or enjoyment of, or on account of his or her having exercised or enjoyed, or on account of his or her having aided or encouraged any other individual in the exercise or enjoyment of, any right granted or protected by the Act or this part. 28 C.F.R. § 35.134 (emphasis added). As in our analysis of section 504 of the Rehabilitation Act, the language employed in the anti-retaliation provisions of Title II does not evince a congressional intent to limit standing to individuals with disabilities. Instead, the use of the phrase "any individual" and the absence of any language limiting standing to those with disabilities indicates Congress's intent to grant standing under Title II "as broadly as is permitted by Article III of the Constitution." See Innovative Health Sys., 117 F.3d at 47 (citing Trafficante v. Metropolitan Life Ins., Co., 409 U.S. 205, 209, 93 S. Ct. 364, 34 L. Ed. 2d 415(1972)). As we recognized in our Rehabilitation Act analysis, it appears that in formulating the language in Title II's anti-retaliation provisions, Congress recognized that disabled individuals may require assistance from others to defend their rights. Cf. Weber, 212 F.3d at 49 (While "Congress could have limited the remedial provisions of [Title II] to claims brought by or on behalf of disabled individuals, it did not do so in apparent recognition of the fact that disabled individuals may need assistance in vindicating their rights...."). Indeed, we find that the language of Title II's anti-retaliation provisions set forth in 28 C.F.R. § 35.134 grants standing to Barker. Clause (a) of § 35.134 protects "any individual" who "has opposed any act or practice made unlawful by this part." 28 C.F.R. § 35.134 (emphasis added). Because Barker engaged in activities opposing her school's special education policies that allegedly violated the ADA, we find that she had standing to pursue her 828 claim under clause (a). Furthermore, clause (b) protects "any individual" from being "coerce[d], intimidate[d], threaten[ed], or interfere[d] with" by a "public entity" "on account of ... her having aided or encouraged any other individual in the exercise or enjoyment of, any right granted or protected by the Act." Id. (emphasis added). Because Barker alleges that she was intimidated by her supervisor for her role in advocating for her students, we find that Barker also has standing under clause (b) of Title II's anti-retaliation provision. The district court's reliance on Zimmerman v. Oregon Department of Justice, 170 F.3d 1169 (9th Cir.1999) in determining that Barker lacked standing under Title II of the ADA was misguided. In Zimmerman, the plaintiff alleged that he was fired from his job because of his visual impairment in violation of Title II of the ADA. Id. at 1171. We held in Zimmerman that the plaintiff's claim should have been brought under Title I of the ADA instead of under Title II, because the plaintiff claimed that his employer discriminated against him because he had a disability, and employment violations are protected under "Title I: Employment." Id. at 1178. Here, relying on Zimmerman, the district court incorrectly found that because Barker also claimed that she was discriminated against by her employer, Barker would similarly only have standing under Title I of the ADA. Contrary to the district court's finding, Barker's situation can easily be distinguished from that in Zimmerman. Unlike Zimmerman, Barker does not allege that she lost her job because her employer discriminated against her because of a disability she had. Instead, Barker alleges that she was retaliated against and subsequently lost her job because she advocated for disabled students who were receiving inadequate public serviceseducational services provided by a public school which are covered under Title II of the ADA ("Title II: Public Services"). See 42 U.S.C. § 12131, et seq. Public services provided to disabled students are the focus of Title II of the ADA. See id. Thus, Barker's claim was appropriately brought under Title II. Accordingly, the district court erred in determining that our holding in Zimmerman "compell[ed] a conclusion contrary to that reached by the Weber court."[5] Instead, our finding that Barker has standing to bring a claim against the Riverside County Office of Education under Title II of the ADA is consistent with our holding in Zimmerman. IV. Conclusion Having concluded that Barker has standing to pursue her retaliation claims under both section 504 of the Rehabilitation Act and Title II of the ADA, we reverse and remand to the district court. REVERSED and REMANDED. NOTES [] The Honorable James K. Singleton, United States District Judge for the District of Alaska, sitting by designation. [1] Although Barker's standing to sue the Riverside County Office of Education pursuant to the Rehabilitation Act and the ADA is under review in this case, Barker unquestionably meets the constitutional standing requirements of Article III. See Valley Forge Christian Coll. v. Am. United for Separation of Church & State, Inc., 454 U.S. 464, 472, 102 S. Ct. 752, 70 L. Ed. 2d 700 (1982). First, Barker alleges an actual injurythat she was constructively terminated from her job as a special education teacher with the Riverside County Office of Education. See id. Second, Barker's injury "fairly can be traced to the challenged action," because Barker alleges that she was constructively terminated based solely upon the intolerable work environment created by the Riverside County Office of Education. See id. (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41, 96 S. Ct. 1917, 48 L. Ed. 2d 450 (1976)). Third, Barker's injury "is likely to be redressed" by the compensatory damages requested. See id. (quoting Simon, 426 U.S. at 38, 96 S. Ct. 1917). [2] See also Weber v. Cranston Sch. Comm., 212 F.3d 41, 48 (1st Cir.2000) (noting that Section 504 integrates the anti-retaliation provision of Title VI of the Civil Rights Act). [3] In Settlegoode v. Portland Public Schools, 371 F.3d 503, 512 n. 6 (9th Cir.2004), we upheld a jury's verdict in favor of a special education teacher who sued her school district for retaliation pursuant to section 504 of the Rehabilitation Act. The teacher sued because the district did not renew her teaching contract after she voiced concerns that the district was discriminating against her disabled students. Id. at 507. In our Settlegoode opinion, however, we did not directly examine whether the teacher had standing pursuant to section 504. As a matter of interest, in an unpublished disposition we also extended protection against retaliation under section 504 of the Rehabilitation Act to a school psychiatrist who advocated on behalf of her disabled students. See Sweet v. Tigard-Tualatin School District, 124 Fed.Appx. 482, 483 (9th Cir. 2005); see also Corrales v. Moreno Valley Unified Sch. Dist., No. EDCV-08-00040-SGL, 2008 WL 4382507, at 2-3 (C.D.Cal. Aug.29, 2008) (granting standing under section 504 of the Rehabilitation Act to a special education teacher whose teaching contract was not renewed after she advocated for her students with disabilities). [4] Also persuasive is the Office for Civil Rights' conclusion that "the preponderance of the evidence showed that [the Riverside County Office of Education] retaliated against [Barker] in violation of Section 504[and] Title II...." [5] The district court also found that "the Zimmerman case foreclose[d] [Barker]'s claim based on 504 of the Rehabilitation Act," because a "side-by-side comparison of the relevant statutory language" in section 504 and Title II of the ADA shows that the two statutes are "virtually identical." Again, we find that the district court erred in finding that Zimmerman "compell[ed] a conclusion contrary to that reached by the Weber court" under section 504.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/102976/	303 U.S. 283 (1938) SAINT PAUL MERCURY INDEMNITY CO. v. RED CAB COMPANY. No. 274. Supreme Court of United States. Submitted January 10, 1938. Decided February 28, 1938. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT. Mr. Burke G. Slaymaker submitted on brief for petitioner. Mr. William E. Reiley submitted for respondent. 284 MR. JUSTICE ROBERTS delivered the opinion of the Court. The decision under review is that, although, at the time of removal of a cause from a state court, the complaint disclosed an amount in controversy requisite to the federal court's jurisdiction, a subsequent amendment, reducing the sum claimed to substantially less than that amount, necessitates remand to the state court. We granted the writ of certiorari because of alleged conflict with our decisions and with those of other federal courts. The respondent, a corporation of Indiana, issued a summons out of the Superior Court of Marion County, Indiana, against the petitioner, a Minnesota corporation doing business in Indiana, and one Harlan as its agent. The complaint alleged that the respondent was subject to the provisions of the Indiana Workmen's Compensation Act and had entered into a contract of insurance with the petitioner, evidenced by a binder, whereby the petitioner insured the respondent against loss or expense by reason of claims for compensation for a period of thirty days from December 30, 1933, and agreed to act for the respondent in the filing of reports and notices under the Act; that, during the term of the insurance, employees of the respondent had suffered injury in the course of employment and made claims therefor; that the petitioner had been notified of each injury and investigated it in connection with the claim for compensation; that after the expiration of the contract the petitioner notified the respondent that it would not recognize any of the claims and denied liability under the binder; that as a consequence respondent was compelled to employ attorneys, investigators, and medical assistants to investigate and satisfy claims covered by the contract and to pay employees who had suffered injuries during the contract period, and 285 to pay, or obligate itself to pay, for medical, hospital, or dental bills in connection with such injuries; to the damage of the respondent in the sum of $4,000. It was alleged that the petitioner had acted, in making the contract, through Harlan, its authorized agent and representative, and an order was prayed that Harlan retain all moneys due by him to the petitioner for the purpose of answering any judgment which might be recovered. The complaint concluded by demanding $4,000 and other appropriate relief. Upon the petitioner's timely application the cause was removed to the United States District Court for Southern Indiana. The respondent thereafter filed an amended complaint, the substance of which is not now material, and later a "second amended complaint for breach of contract and for damages," in which the allegations of the original complaint were repeated and damages were claimed in the sum of $4,000. An exhibit was attached which gave the names of the employes and the amounts expended in connection with their asserted injuries totaling $1,380.89. The court dismissed Harlan as a defendant, transferred the cause to the law docket, and overruled a demurrer to the complaint as not stating facts sufficient to constitute a cause of action. The answer denied the making of the contract. A jury trial was waived and the court made findings, stated its conclusions, and entered judgment for the respondent for $1,162.98. The petitioner appealed. The Court of Appeals refused to decide the merits on the ground that as the record showed respondent's claim did not equal the amount necessary to give the District Court jurisdiction, the case should have been remanded to the state court.[1] The question presented is one of statutory construction. The act defining the jurisdiction of district courts of the 286 United States is § 24 of the Judicial Code.[2] So far as here material, the Code confers jurisdiction of a suit of a civil nature, where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of $3,000 and is between citizens of different states. Authority for removal of certain causes from a state to a federal court was first given by § 12 of the Judiciary Act of 1789[3] which permitted removal of a civil suit, instituted by a citizen of the state in which the suit was brought, against a citizen of another state, where the matter in dispute exceeded the sum or value of $500, exclusive of costs. Such removal could be had only at the instance of the nonresident defendant. The Act of July 27, 1866,[4] enlarged the privilege of removal by providing that if, in such a civil suit, it was shown that a nonresident defendant was party to a separable controversy, which could be determined without the presence of other defendants, that defendant might remove the cause. The Judiciary Act of 1875[5] altered preexisting law to permit suits involving a controversy between citizens of different states to be removed by either party. The Judiciary Acts of 1887-1888[6] increased the jurisdictional amount to more than $2,000, exclusive of interest and costs, and confined the right of removal to a nonresident defendant, and the Judicial Code increased the limit to over $3,000, exclusive of interest and costs, and also restricted the privilege to nonresident defendants.[7] The 287 statute governing dismissal or remand for want of jurisdiction is § 37 of the Code.[8] "If in any suit commenced in a district court, or removed from a State court to a district court of the United States, it shall appear to the satisfaction of the said district court, at any time after such suit has been brought or removed thereto, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said district court, or that the parties to said suit have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable or removable under this chapter, the said district court shall proceed no further therein, but shall dismiss the suit or remand it to the court from which it was removed, as justice may require, and shall make such order as to costs as shall be just. This provision first appeared as § 5[9] of the Act of March 3, 1875 (supra,) and save for the elision of a concluding clause, and the substitution of "district court" for "circuit court," is identical with that section. It was included in the Judiciary Acts of 1887-1888, supra, and has been continuously in force since 1875. It altered the practice by requiring the court to dismiss or remand of its own motion in a proper case although want of jurisdiction was not raised by appropriate motion or by plea or answer,[10] but did not change the substantial basis for 288 the court's action. The principles governing dismissal of a cause initiated in the federal court or the remand of one begun in a state court have remained as they were before the section was adopted. The intent of Congress drastically to restrict federal jurisdiction in controversies between citizens of different states has always been rigorously enforced by the courts. The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls[11] if the claim is apparently made in good faith.[12]289 It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.[13] The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction.[14] Nor does the fact that the complaint discloses the existence of a valid defense to the claim.[15] But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed, or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed.[16] Events occurring 290 subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction.[17] What already has been said, and circumstances later to be discussed, lead to the conclusion that a dismissal would not have been justified had the suit been brought in the federal court. The principles which govern remand of a removed cause, more urgently require that it should not have been remanded. In a cause instituted in the federal court the plaintiff chooses his forum. He knows or should know whether his claim is within the statutory requirement as to amount. His good faith in choosing the federal forum is open to challenge not only by resort to the face of his complaint, but by the facts disclosed at trial, and if from either source it is clear that his claim never could have amounted to the sum necessary to give jurisdiction there is no injustice in dismissing the suit. Indeed, this is the court's duty under the Act of 1875. In such original actions it may also well be that plaintiff and defendant have colluded to confer jurisdiction by the method of the one claiming a fictitious amount and the other failing to deny the veracity of the averment of amount in controversy. Upon disclosure of that state of facts the court should dismiss. A different situation is presented in the case of a suit instituted in a state court and thence removed. There is a strong presumption that the plaintiff has not claimed a large amount in order to confer jurisdiction on a federal court or that the parties have colluded to that end.[18]291 For if such were the purpose suit would not have been instituted in the first instance in the state but in the federal court. It is highly unlikely that the parties would pursue this roundabout and troublesome method to get into the federal court by removal when by the same device the suit could be instituted in that court.[19] Moreover, the status of the case as disclosed by the plaintiff's complaint is controlling in the case of a removal, since the defendant must file his petition before the time for answer or forever lose his right to remove.[20] Of course, 292 if, upon the face of the complaint, it is obvious that the suit cannot involve the necessary amount, removal will be futile and remand will follow.[21] But the fact that it appears from the face of the complaint that the defendant has a valid defense, if asserted, to all or a portion of the claim, or the circumstance that the rulings of the district court after removal reduce the amount recoverable below the jurisdictional requirement,[22] will not justify remand. And though, as here, the plaintiff after removal, by stipulation, by affidavit, or by amendment of his pleadings, reduces the claim below the requisite amount, this does not deprive the district court of jurisdiction.[23] 293 Thus events occurring subsequent to removal which reduce the amount recoverable, whether beyond the plaintiff's control or the result of his volition, do not oust the district court's jurisdiction once it has attached.[24] This is well illustrated by Kirby v. American Soda Fountain Co., 194 U.S. 141, 146, where in a suit brought by Kirby he alleged that he was induced by the company's false representations to agree to the exchange of his apparatus for one made by the defendant and to pay $2025 in addition. He prayed the cancellation of his obligation to pay the balance of $2025, damages of $2500, and general relief. The cause was removed to the circuit court. The company answered denying Kirby's charges of fraud, relied upon a written agreement alleged to contain all the terms of the contract, asserted full performance on its part, and that he had paid but $325 on his obligation to pay $2025. By cross-complaint, the company demanded $1700 and interest from Kirby and the establishment of a lien on the apparatus delivered to him. Kirby answered that he had voluntarily dismissed the original suit brought by him and that the cross-bill was not within the jurisdiction of the court because it did not claim in excess of $2,000, exclusive of interest and costs. The plea was overruled and judgment rendered on the cross-complaint. In affirming, the court referred to the amount demanded in Kirby's original complaint and said: "The matter in dispute having thus been made to exceed the sum or value of two thousand dollars, exclusive of interest and costs, defendant presented his petition and bond for removal, 294 and the cause was thereupon removed. The jurisdiction thus acquired by the Circuit Court was not divested by plaintiff's subsequent action." Fifty years earlier in Kanouse v. Martin, 15 How. 198, the court had held that voluntary reduction of the amount demanded below the sum necessary to give the circuit court jurisdiction could not defeat that jurisdiction once removal proceedings had been perfected. In reliance upon these precedents many cases, cited in Note 23, have been decided. We think this well established rule is supported by ample reason. If the plaintiff could, no matter how bona fide his original claim in the state court, reduce the amount of his demand to defeat federal jurisdiction the defendant's supposed statutory right of removal would be subject to the plaintiff's caprice. The claim, whether well or ill founded in fact, fixes the right of the defendant to remove, and the plaintiff ought not to be able to defeat that right and bring the cause back to the state court at his election. If he does not desire to try his case in the federal court he may resort to the expedient of suing for less than the jurisdictional amount, and though he would be justly entitled to more, the defendant cannot remove.[25] This view is further supported by the authorities as to causes in which jurisdiction depends on diversity of citizenship. It uniformly has been held that in a suit properly begun in the federal court the change of citizenship of a party does not oust the jurisdiction.[26] The same 295 rule governs a suit originally brought in a state court and removed to a federal court.[27] The decisions as to remand of a cause removed because it involves a separable controversy are not inconsistent with those concerning remand for lack of jurisdictional amount. In the case of a separable controversy, if, after removal, the plaintiff discontinues or dismisses as to the defendant who removed, so that there no longer exists any separable controversy, the cause must be remanded.[28] If a cause be removed on this ground the whole case, including the controversy between citizens of the same state, is taken over by the federal court only because one or more of the defendants is entitled to invoke its jurisdiction. The basis of federal jurisdiction failing, it is proper that the remaining parties, who were involuntarily taken into the federal court, should, upon the cessation of the separable controversy which was the cause of their transmission to another tribunal, have their case returned to the state court. The present case well illustrates the propriety of the rule that subsequent reduction of the amount claimed cannot oust the district court's jurisdiction. Suit was instituted in the state court June 5, 1934. The lump sum claimed was largely in excess of $3,000, exclusive of interest and costs. The items which went to make up the respondent's demand for indemnity were numerous and *296 each, in turn, was itself the total of several items of expenditure or liability. There is nothing to indicate that all of the sums for which reimbursement was claimed had actually been expended prior to the beginning of suit or that the sums thereafter to be expended had been ascertained. Not until the second amended complaint was filed in the United States court, in November 1934, did the respondent furnish a statement of the particulars of its claim. That statement is not inconsistent with the making of a claim in good faith for over $3,000 when the suit was instituted. Nor is there evidence that the petitioner when it removed the cause knew, or had reason to believe, that the respondent's claim, whether well or ill founded in law or fact, involved less than $3,000. On the face of the pleadings petitioner was entitled to invoke the jurisdiction of the federal court, and a reduction of the amount claimed, after removal, did not take away that privilege. The judgment is reversed and the cause is remanded to the Circuit Court of Appeals for further proceedings in conformity to this opinion. Reversed. MR. JUSTICE CARDOZO and MR. JUSTICE REED took no part in the consideration or decision of this case. NOTES [1] 90 F. (2d) 229. [2] Act of March 3, 1911, c. 231, § 24, as amended, 36 Stat. 1091, U.S.C. Tit. 28, § 41. [3] Act of Sept. 24, 1789, § 12, 1 Stat. 73, 79. [4] c. 288, 14 Stat. 306. [5] Act of March 3, 1875, 18 Stat. 470. [6] Act of March 3, 1887, § 1, 24 Stat. 552; Act of Aug. 13, 1888, § 1, 25 Stat. 433. [7] Act of March 3, 1911, c. 231, §§ 24 and 28, 36 Stat. 1087, 1091, 1094. [8] Act of March 3, 1911, c. 231, § 37, 36 Stat. 1098, U.S.C. Tit. 28, § 80. [9] 18 Stat. 472. [10] Prior to 1875 the courts did not act of their own motion but upon a motion to dismiss or a plea in abatement. Smith v. Kernochen, 7 How. 198; McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 183. Since then it has been their duty not only to act upon a motion to dismiss, (Steigleder v. McQuesten, 198 U.S. 141) or, if the state practice permits, upon a denial of jurisdiction in the answer, (Gilbert v. David, 235 U.S. 561; North Pacific S.S. Co. v. Soley, 257 U.S. 216) but to act sua sponte (McNutt v. General Motors Acceptance Corp., supra, 184) upon any disclosure, whether in the pleadings or the proofs, which satisfies the court, in the exercise of a sound judicial discretion, that the plaintiff did not in fact have a claim for the jurisdictional amount or value, and knew, or reasonably ought to have known, that fact. Williams v. Nottawa, 104 U.S. 209, 211; McNutt v. General Motors Acceptance Corp., supra, 184. It is plaintiff's burden both to allege with sufficient particularity the facts creating jurisdiction, in view of the nature of the right asserted, and, if appropriately challenged, or if inquiry be made by the court of its own motion, to support the allegation. McNutt v. General Motors Acceptance Corp., supra, pp. 182-189; KVOS v. Associated Press, 299 U.S. 269. Even an appellate court must notice the absence of the elements requisite to original jurisdiction or to a removal. Williams v. Nottawa, supra; Robinson v. Anderson, 121 U.S. 522; McNutt v. General Motors Acceptance Corp., supra; American Bridge Co. v. Hunt, 130 Fed. 302; International & G.N.R. Co. v. Hoyle, 149 Fed. 180. [11] Wilson v. Daniel, 3 Dall. 401, 407, 408; Barry v. Edmunds, 116 U.S. 550; Sherman v. Clark, 3 McLean 91, Fed. Cas. 12763; Stuckert v. Alexander, 4 F. Supp. 172. [12] Peeler v. Lathrop, 48 Fed. 780; Ung Lung Chung v. Holmes, 98 Fed. 323; Washington County v. Williams, 111 Fed. 801; Greene County Bank v. Teasdale Comm'n Co., 112 Fed. 801; American Sheet & Tin Plate Co. v. Winzeler, 227 Fed. 321; Owen M. Bruner Co. v. O.R. Manefee Lumber Co., 292 Fed. 985; Walker Grain Co. v. Southwestern Tel, & Tel, Co., 10 F. (2d) 272. [13] Barry v. Edmunds, supra; Wetmore v. Rymer, 169 U.S. 115, 122; Put-In-Bay Waterworks Co. v. Ryan, 181 U.S. 409, 432-433; Hampton Stave Co. v. Gardner, 154 Fed. 805. [14] Smithers v. Smith, 204 U.S. 632; Holden v. Utah & M.M. Co., 82 Fed. 209; Maffet v. Quine, 95 Fed. 199; Kunkel v. Brown, 99 Fed. 593; Ung Lung Chung v. Holmes, supra; Washington County v. Williams, supra; Denver City Tramway Co. v. Norton, 141 Fed. 599; Hampton Stave Co. v. Gardner, supra; O.J. Lewis Mercantile Co. v. Klepner, 176 Fed. 343; St. Tammany Bank & T. Co. v. Winfield, 263 Fed. 371; Ragsdale v. Rudich, 293 Fed. 182; Walker Grain Co. v. Southwestern Tel. & Tel. Co., 10 F. (2d) 272; Kimel v. Missouri State Life Ins. Co., 71 F. (2d) 921; Simecek v. United States National Bank, 91 F. (2d) 214. [15] Interstate Bldg. & L. Assn. v. Edgefield Hotel Co., 109 Fed. 692; Armstrong v. Walters, 219 Fed. 320; Mullins Lumber Co. v. Williamson & Brown Land Co., 246 Fed. 232. [16] Williams v. Nottawa, supra; Barry v. Edmunds, supra; Vance v. W.A. Vandercook Co., 170 U.S. 468; Lion Bonding & S. Co. v. Karatz, 262 U.S. 77; First National Bank v. Louisiana Highway Comm'n, 264 U.S. 308; Simon v. House, 46 Fed. 317; Horst v. Merkley, 59 Fed. 502; Cabot v. McMaster, 61 Fed. 129; Bank of Arapahoe v. David Bradley & Co., 72 Fed. 867; Armstrong v. Walters, supra; Maurel v. Smith, 220 Fed. 195; Le Roy v. Hartwick, 229 Fed. 857; Sclarenco v. Chicago Bonding Co., 236 Fed. 592; Operators Piano Co. v. First Wisconsin Trust Co., 283 Fed. 904; Wilderman v. Roth, 17 F. (2d) 486; Chick v. New England Tel. & Tel. Co., 36 F. (2d) 832; Nixon v. Town Taxi, Inc., 39 F. (2d) 618; Cohn v. Cities Service Co., 45 F. (2d) 687; Miller-Crenshaw Co. v. Colorado Mill Co., 84 F. (2d) 930. [17] Mutual Life Ins. Co. v. Rose, 294 Fed. 122; Hood v. Bell, 84 F. (2d) 136. [18] In Smith v. Greenhow, 109 U.S. 669, 671, a case of trespass for entering plaintiff's premises and carrying away goods of the value of $100, interfering with plaintiff's business, annoying and disturbing him, &c., the damages were laid at $6,000. Though there was not diversity of citizenship, as the pleadings raised a federal question, the cause was removed. It was remanded as the circuit court thought there was no federal question involved. The decision was reversed. Speaking of the facts disclosed the court said: "There is a ground for remanding the cause suggested by the record, but not sufficiently apparent to justify us in resorting to it to support the action of the circuit court. The value of the property taken is stated in the declaration to be but $100, although the damages for the alleged trespass are laid at $6,000.. . . We cannot, of course, assume as a matter of law, that the amount laid, or a less amount, greater than $500, is not recoverable upon the case stated in the declaration, and cannot therefore justify the order remanding the cause, on the ground that the matter in dispute does not exceed the sum or value of $500. But if the circuit court had found, as matter of fact, that the amount of damages stated in the declaration was colorable, and had been laid beyond the amount of a reasonable expectation of recovery, for the purpose of creating a case removable under the act of Congress, so that, in the words of the 5th section of the act of 1875, it appeared that the suit `did not really and substantially involve a dispute or controversy properly within the jurisdiction of said circuit court,' the order remanding it to the State court could have been sustained." This appears to be the only reported case of a removal by the plaintiff as authorized by the Act of 1875, and is distinguishable on that ground, as respects the possibility that plaintiff's claim may have been colorable for the purpose of removing the case. [19] Hayward v. Nordberg Mfg. Co., 85 Fed. 4, 9. (Per Taft, Lurton and Clark, JJ.) [20] Gordon v. Longest, 16 Pet. 97; Kanouse v. Martin, 15 How. 198; Chesbrough v. Northern Trust Co., 252 U.S. 83, affirming Chesbrough v. Woodworth, 251 Fed. 881; Muns v. DeNemours, 2 Wash. C.C. 463, Fed. Cas. 9931; Riggs v. Clark, 71 Fed. 560; Hayward v. Nordberg Mfg. Co., supra; Johnson v. Computing Scale Co., 139 Fed. 339. [21] North American T. & T. Co. v. Morrison, 178 U.S. 262. [22] Levinski v. Middlesex Banking Co., 92 Fed. 449; Tennent-Stribling Shoe Co. v. Roper, 94 Fed. 739; Mannheimer v. Nederlandsche, 6 F. Supp. 564. Contra: Jones v. Western Union Tel. Co., 233 Fed. 301. [23] Kanouse v. Martin, supra; Kirby v. American Soda Fountain Co., 194 U.S. 141; Wright v. Wells, Pet. C.C. 220, Fed. Cas. 18,101; Roberts v. Nelson, 8 Blatchf. 74, Fed. Cas. 11,907; Zinkeisen v. Hufschmidt, 1 Cent. L.J. 144, Fed. Cas. 18,214; Waite v. Phoenix Ins. Co., 62 Fed. 769; Riggs v. Clark, supra; Hayward v. Nordberg Mfg. Co., supra; Johnson v. Computing Scale Co., supra; Coffin v. Philadelphia, W. & B.R. Co., 118 Fed. 688; Donovan v. Dixieland Amusement Co., 152 Fed. 661; Bernheim v. Louisville Property Co., 221 Fed. 273; Jellison v. Krell Piano Co., 246 Fed. 509; Twin Hills Gasoline Co. v. Bradford Oil Corp., 264 Fed. 440; Kane v. Reserve Oil Corp., 52 F. (2d) 972; Travelers' Protective Assn. v. Smith, 71 F. (2d) 511; Beddings v. Great Eastern Stages, Inc., 6 F. Supp. 529. Contra: Hughes & Co. v. Peper Tobacco Warehouse Co., 126 Fed. 687. In two tort cases where large damages were claimed, but it appeared at trial that plaintiff's injuries and losses were so slight that a verdict for more than a fraction of the jurisdictional amount could not be sustained the courts remanded. Though not placed upon that ground, their action may have been justified by the conviction that the defendant when it removed knew that the amount involved was too little to give jurisdiction: Turmine v. West Jersey & S.R. Co., 44 F. (2d) 614; American Stores Co. v. Gerlach, 55 F. (2d) 658. [24] The same principle applies in cases where a fixed amount is requisite to jurisdiction on appeal. Lee v. Watson, 1 Wall. 337; Cooke v. United States, 2 Wall. 218. [25] Woods v. Massachusetts Protective Assn., 34 F. (2d) 501. And an amendment in the state court reducing the claim below the jurisdictional amount before removal is perfected is effective to invalidate removal and requires a remand of the cause: Maine v. Gilman, 11 Fed. 214; Waite v. Phoenix Ins. Co., supra; Harley v. Firemen's Fund Ins. Co., 245 Fed. 471. [26] Morgan's Heirs v. Morgan, 2 Wheat. 290, 297; Mullan v. Torrance, 9 Wheat. 537; Dunn v. Clarke, 8 Pet. 1; Clarke v. Mathewson, 12 Pet. 164; Tug River Coal & Salt Co. v. Brigel, 86 Fed. 818, affirming 73 Fed. 13. [27] Haracovic v. Standard Oil Co., 105 Fed. 785; Lebensberger v. Scofield, 139 Fed. 380. Change of parties by substitution or by intervention does not oust the jurisdiction: Phelps v. Oaks, 117 U.S. 236; Hardenbergh v. Ray, 151 U.S. 112; Wichita R. & Light Co. v. Public Utilities Comm'n, 260 U.S. 48. [28] Texas Transportation Co. v. Seeligson, 122 U.S. 519; Torrence v. Shedd, 144 U.S. 527; Iowa Homestead Co. v. Des Moines N. & R. Co., 8 Fed. 97; Bane v. Keefer, 66 Fed. 610; Youtsey v. Hoffman, 108 Fed. 699; Cassidy v. Atlanta & C.A.L. Ry. Co., 109 Fed. 673; Sklarsky v. Great Atlantic & P. Tea. Co., 47 F. (2d) 662.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/108404/	404 U.S. 71 (1971) REED v. REED, ADMINISTRATOR. No. 70-4. Supreme Court of United States. Argued October 19, 1971 Decided November 22, 1971 APPEAL FROM THE SUPREME COURT OF IDAHO. Allen R. Derr argued the cause for appellant. With him on the briefs were Melvin L. Wulf, Ruth Bader Ginsburg, Pauli Murray, and Dorothy Kenyon. Charles S. Stout argued the cause for appellee. With him on the brief was Myron E. Anderson. Briefs of amici curiae urging reversal were filed by J. Lee Rankin and Norman Redlich for the City of New York; by Martha W. Griffiths, Phineas Indritz, Leo Kanowitz, Marguerite Rawalt, Sylvia Roberts, and Faith Seidenberg for American Veterans Committee, Inc., et al.; and by Birch Bayh for the National Federation of Business and Professional Women's Clubs, Inc. MR. CHIEF JUSTICE BURGER delivered the opinion of the Court. Richard Lynn Reed, a minor, died intestate in Ada County, Idaho, on March 29, 1967. His adoptive parents, who had separated sometime prior to his death, are the parties to this appeal. Approximately seven months after Richard's death, his mother, appellant Sally Reed, filed a petition in the Probate Court of Ada County, 72 seeking appointment as administratrix of her son's estate.[1] Prior to the date set for a hearing on the mother's petition, appellee Cecil Reed, the father of the decedent, filed a competing petition seeking to have himself appointed administrator of the son's estate. The probate court held a joint hearing on the two petitions and thereafter ordered that letters of administration be issued to appellee Cecil Reed upon his taking the oath and filing the bond required by law. The court treated §§ 15-312 and 15-314 of the Idaho Code as the controlling statutes and read those sections as compelling a preference for Cecil Reed because he was a male. Section 15-312[2] designates the persons who are entitled to administer the estate of one who dies intestate. In making these designations, that section lists 11 classes of persons who are so entitled and provides, in substance, 73 that the order in which those classes are listed in the section shall be determinative of the relative rights of competing applicants for letters of administration. One of the 11 classes so enumerated is "[t]he father or mother" of the person dying intestate. Under this section, then, appellant and appellee, being members of the same entitlement class, would seem to have been equally entitled to administer their son's estate. Section 15-314 provides, however, that "[o]f several persons claiming and equally entitled [under § 15-312] to administer, males must be preferred to females, and relatives of the whole to those of the half blood." In issuing its order, the probate court implicitly recognized the equality of entitlement of the two applicants under § 15-312 and noted that neither of the applicants was under any legal disability; the court ruled, however, that appellee, being a male, was to be preferred to the female appellant "by reason of Section 15-314 of the Idaho Code." In stating this conclusion, the probate judge gave no indication that he had attempted to determine the relative capabilities of the competing applicants to perform the functions incident to the administration of an estate. It seems clear the probate judge considered himself bound by statute to give preference to the male candidate over the female, each being otherwise "equally entitled." Sally Reed appealed from the probate court order, and her appeal was treated by the District Court of the Fourth Judicial District of Idaho as a constitutional attack on § 15-314. In dealing with the attack, that court held that the challenged section violated the Equal Protection Clause of the Fourteenth Amendment[3] and was, therefore, 74 void; the matter was ordered "returned to the Probate Court for its determination of which of the two parties" was better qualified to administer the estate. This order was never carried out, however, for Cecil Reed took a further appeal to the Idaho Supreme Court, which reversed the District Court and reinstated the original order naming the father administrator of the estate. In reaching this result, the Idaho Supreme Court first dealt with the governing statutory law and held that under § 15-312 "a father and mother are `equally entitled' to letters of administration," but the preference given to males by § 15-314 is "mandatory" and leaves no room for the exercise of a probate court's discretion in the appointment of administrators. Having thus definitively and authoritatively interpreted the statutory provisions involved, the Idaho Supreme Court then proceeded to examine, and reject, Sally Reed's contention that § 15-314 violates the Equal Protection Clause by giving a mandatory preference to males over females, without regard to their individual qualifications as potential estate administrators. 93 Idaho 511, 465 P.2d 635. Sally Reed thereupon appealed for review by this Court pursuant to 28 U.S. C. § 1257 (2), and we noted probable jurisdiction. 401 U.S. 934. Having examined the record and considered the briefs and oral arguments of the parties, we have concluded that the arbitrary preference established in favor of males by § 15-314 of the Idaho Code cannot stand in the face of the Fourteenth Amendment's command that no State deny the equal protection of the laws to any person within its jurisdiction.[4] 75 Idaho does not, of course, deny letters of administration to women altogether. Indeed, under § 15-312, a woman whose spouse dies intestate has a preference over a son, father, brother, or any other male relative of the decedent. Moreover, we can judicially notice that in this country, presumably due to the greater longevity of women, a large proportion of estates, both intestate and under wills of decedents, are administered by surviving widows. Section 15-314 is restricted in its operation to those situations where competing applications for letters of administration have been filed by both male and female members of the same entitlement class established by § 15-312. In such situations, § 15-314 provides that different treatment be accorded to the applicants on the basis of their sex; it thus establishes a classification subject to scrutiny under the Equal Protection Clause. In applying that clause, this Court has consistently recognized that the Fourteenth Amendment does not deny to States the power to treat different classes of persons in different ways. Barbier v. Connolly, 113 U.S. 27 (1885); Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61 (1911); Railway Express Agency v. New York, 336 U.S. 106 (1949); McDonald v. Board of Election Commissioners, 394 U.S. 802 (1969). The Equal Protection Clause of that amendment does, however, deny to States the power to legislate that different treatment be accorded to persons placed by a statute into 76 different classes on the basis of criteria wholly unrelated to the objective of that statute. A classification "must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike." Royster Guano Co. v. Virginia, 253 U.S. 412, 415 (1920). The question presented by this case, then, is whether a difference in the sex of competing applicants for letters of administration bears a rational relationship to a state objective that is sought to be advanced by the operation of §§ 15-312 and 15-314. In upholding the latter section, the Idaho Supreme Court concluded that its objective was to eliminate one area of controversy when two or more persons, equally entitled under § 15-312, seek letters of administration and thereby present the probate court "with the issue of which one should be named." The court also concluded that where such persons are not of the same sex, the elimination of females from consideration "is neither an illogical nor arbitrary method devised by the legislature to resolve an issue that would otherwise require a hearing as to the relative merits . . . of the two or more petitioning relatives . . . ." 93 Idaho, at 514, 465 P. 2d, at 638. Clearly the objective of reducing the workload on probate courts by eliminating one class of contests is not without some legitimacy. The crucial question, however, is whether § 15-314 advances that objective in a manner consistent with the command of the Equal Protection Clause. We hold that it does not. To give a mandatory preference to members of either sex over members of the other, merely to accomplish the elimination of hearings on the merits, is to make the very kind of arbitrary legislative choice forbidden by the Equal Protection Clause of the Fourteenth Amendment; and whatever may be 77 said as to the positive values of avoiding intrafamily controversy, the choice in this context may not lawfully be mandated solely on the basis of sex. We note finally that if § 15-314 is viewed merely as a modifying appendage to § 15-312 and as aimed at the same objective, its constitutionality is not thereby saved. The objective of § 15-312 clearly is to establish degrees of entitlement of various classes of persons in accordance with their varying degrees and kinds of relationship to the intestate. Regardless of their sex, persons within any one of the enumerated classes of that section are similarly situated with respect to that objective. By providing dissimilar treatment for men and women who are thus similarly situated, the challenged section violates the Equal Protection Clause. Royster Guano Co. v. Virginia, supra. The judgment of the Idaho Supreme Court is reversed and the case remanded for further proceedings not inconsistent with this opinion. Reversed and remanded. NOTES [1] In her petition, Sally Reed alleged that her son's estate, consisting of a few items of personal property and a small savings account, had an aggregate value of less than $1,000. [2] Section 15-312 provides as follows: "Administration of the estate of a person dying intestate must be granted to some one or more of the persons hereinafter mentioned, and they are respectively entitled thereto in the following order: "1. The surviving husband or wife or some competent person whom he or she may request to have appointed. "2. The children. "3. The father or mother. "4. The brothers. "5. The sisters. "6. The grandchildren. "7. The next of kin entitled to share in the distribution of the estate. "8. Any of the kindred. "9. The public administrator. "10. The creditors of such person at the time of death. "11. Any person legally competent. "If the decedent was a member of a partnership at the time of his decease, the surviving partner must in no case be appointed administrator of his estate." [3] The court also held that the statute violated Art. I, § 1, of the Idaho Constitution. [4] We note that § 15-312, set out in n. 2, supra, appears to give a superior entitlement to brothers of an intestate (class 4) than is given to sisters (class 5). The parties now before the Court are not affected by the operation of § 15-312 in this respect, however, and appellant has made no challenge to that section. We further note that on March 12, 1971, the Idaho Legislature adopted the Uniform Probate Code, effective July 1, 1972. Idaho Laws 1971, c. 111, p. 233. On that date, §§ 15-312 and 15-314 of the present code will, then, be effectively repealed, and there is in the new legislation no mandatory preference for males over females as administrators of estates.	01-03-2023	04-28-2010
https://www.courtlistener.com/api/rest/v3/opinions/2504411/	303 F. Supp. 2d 1292 (2004) William M. NOBLES, et al., Plaintiffs, v. RURAL COMMUNITY INSURANCE SERVICES, Defendant. Civil Action No. 00-T-375-S. United States District Court, M.D. Alabama, Northern Division. February 24, 2004. 1294 B. Stephen Sansom, B. Stephen Sansom, P.C., Florala, AL, Marita K. Murphy, Murphy Law Office, Stanley J. Murphy, Tuscaloosa, AL, for plaintiff. Douglass Taylor Flowers, Daniel F. Johnson, Lewis, Brackin, Flowers & Hall, Dothan, AL, Elizabeth T. Bufkin, W. Kurt Henke, Henke Bufkin, Clarksdale, MS, for defendant. OPINION MYRON H. THOMPSON, District Judge. This lawsuit, which the court has described as having a "convoluted procedural history," Nobles v. Rural Community Ins. Servs., 303 F. Supp. 2d 1279, 1280 (M.D.Ala. 2004), was originally bought by plaintiffs William M. Nobles and Ronnie Hales in state court in February 2000, claiming that defendant Rural Community Insurance Services (RCIS) told them that their land was insurable under a multiple-peril crop-insurance policy and then later denied their crop-loss claims on the basis that their land was uninsurable. Nobles and Hales allege state-law breach of contract, fraud, suppression of material facts, negligence and wantonness, negligent and wanton failure to supervise and train employees, and bad faith.[1] On March 29, 2000, RCIS removed the case to this court based on diversity-of-citizenship jurisdiction. See 28 U.S.C.A. §§ 1332 (diversity), 1446 (removal). This case is now before the court on the parties' cross-motions for summary judgment. For the reasons that follow, the court will grant RCIS's motion in full. I. SUMMARY-JUDGMENT STANDARD Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Under Rule 56, the party seeking summary judgment must first inform the court of the basis for the motion, and the burden then shifts to the non-moving party to demonstrate why summary judgment would not be proper. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986); see also Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-17 (11th Cir.1993) (discussing burden-shifting under Rule 56). The non-moving party must affirmatively set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials in the pleadings. Fed.R.Civ.P. 56(e). The court's role at the summary-judgment stage is not to weigh the evidence or to determine the truth of the matter, but rather to determine only whether a genuine issue exists for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). In doing so, the court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Matsushita 1295 Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). II. FACTUAL BACKGROUND Because the court finds in favor of RCIS, it will look at the facts in a light most favorable to Nobles and Hales. See Antenor v. D & S Farms, 88 F.3d 925, 927 n. 2 (11th Cir.1996). In 1999, Nobles and Hales decided to plant cotton on First American Farm in Walton County, Florida.[2] In order to pay for the crop, they had to secure financing, and, in order to secure financing, they were required by their banks and suppliers to purchase crop insurance. Nobles and Hales spoke with Joseph Carpenter, an authorized agent for RCIS, and Philip East, RCIS's regional sales manager, about insurance. East told them that, because their land was not listed as uninsurable in the actuarials published by the Federal Crop Insurance Corporation (FCIC), there would be no reason for it to be uninsurable. The FCIC is both a governmental corporation and an agency of and within the United States. Department of Agriculture (USDA). It was created pursuant to the Federal Crop Insurance Act (FCIA), 7 U.S.C.A. §§ 1501 to 1521. Based on East's assurances, Nobles and Hales bought two types of coverage for their crops from RCIS. First, they bought multiple-peril crop insurance (MPCI). Under this policy, which is based on yield guarantees rather than dollars, they were guaranteed to produce a set number of pounds of cotton; for every pound they fell short of that guarantee, they would be paid an agreed-upon amount. While MPCI policies can be issued by private insurance companies, FCIC regulations and provisions govern the sale, issuance, and service of these policies. MPCI policies are backed (reinsured) by the FCIC; all premiums collected for MPCI policies are paid to the United States government, and all claims paid under MPCI policies are paid with United States Treasury funds. Second, Nobles and Hales bought an added-price-option (APO) policy, which would pay them an additional 30¢ per pound-of-cotton losses on top of any payment they received under the MPCI policy. The APO policy is separate from the MPCI policy; unlike the MPCI policy, it is issued and funded privately by RCIS. That spring, Nobles and Hales planted their cotton crop on First American Farm. In late June, they filed acreage reports with RCIS stating that they each had a 50 % interest in 7,787 acres of cotton on farm serial number 2303. Apparently, 870 of these acres were actually planted on farm serial number 2301, which is also part of First American Farm; however, Nobles and Hales did not make this distinction on the acreage report filed with RCIS, and RCIS says that it was unaware of these 870 separate acres until after this lawsuit was filed. During the growing season, at the request of the FCIC's Risk Management Agency, RCIS adjusters Wayne Godwin and Robin Barnett inspected Nobles and Hales's crop to verify that they were using proper farming practices. In the course of those inspections, RCIS determined that some of Nobles and Hales's acreage might not be insurable because it had not been planted and harvested in one of the previous three crop years, thus making it ineligible for insurance under ¶ 9(a) of the MPCI policy. RCIS did not tell Nobles and Hales of its discovery, but it did spend a significant amount of time investigating the acreage in question to determine if it 1296 was insurable under the terms of the MPCI policies. Eventually, Nobles and Hales's crop failed due to drought. At some point thereafter, Godwin and Barnett told Nobles and Hales that 4,990 acres of their cotton on farm 2303 were uninsurable. Godwin and Barnett arrived at this number by: (1) looking at forms on file with the Farm Service Agency ("FSA"), which showed that only 1,687 acres of farm 2303 had been farmed in the previous three years; (2) determining that 104 acres were exempt from the requirements of ¶ 9(a) because they qualified under a USDA program; and (3) speaking with the Zorn Brothers, who had farmed 136 acres of the property in the prior three years, acreage not listed with the FSA. Thus, Godwin and Barnett concluded that these 1,927 acres were insurable under the MPCI policy and that the rest of Nobles and Hales's crop the other 4,990 acres on farm 2303 and the then-unknown 870 acres on farm 2301 were uninsurable. Nobles and Hales disagreed with Godwin and Barnett's findings and requested that their version of the insurance claim be submitted to RCIS. In late October, Nobles and Hales prepared a worksheet explaining their version of the claim requesting compensation for 6,917 (1,929 + 4,990) acres on farm 2303 only and this worksheet, along with one describing Godwin and Barnett's version of the insurance claim, was forwarded to RCIS. Based on Godwin and Barnett's determination that 4,990 acres of farm 2303 had not been farmed in one of the three previous years, RCIS denied Nobles and Hales's claims for that acreage under both their MPCI and APO policies. The stated basis for this denial was that this land was ineligible for insurance under ¶ 9(a) of the MPCI policy. From the record, it is unclear whether, before filing this lawsuit, Nobles and Hales were paid for their crop losses on the 1,927 acres that all parties agreed were insurable. RCIS's denial of their claims led Nobles and Hales to file this suit against RCIS. On November 21, 2000, pursuant to the arbitration agreement set forth in the MPCI policy, United States District Judge Ira DeMent, to whom the case was originally assigned, found that the parties had agreed to arbitrate any factual disputes and compelled the parties to arbitrate their factual disputes. Nobles v. Rural Community Ins. Serve., 122 F. Supp. 2d 1290 (M.D.Ala.2000). On September 5 and 6, 2001, an arbitration panel heard evidence, and, on November 28, 2001, it found that coverage existed under the MPCI policy and the APO policy for the entire 7,787 acres for which Nobles and Hales sought coverage, and awarded them damages in the amount of all remaining unpaid indemnities under the MCPI and APO policies. On December 13, 2001, Nobles and Hales moved to have this case reinstated to the court's active docket in order to seek relief on their state-law claims against RCIS. III. DISCUSSION A. Preemption As an initial matter, RCIS argues that Nobles and Hales's state-law claims are preempted by federal law and should be dismissed.[3] RCIS says that, because it 1297 was complying with established FCIC rules, regulations, and directives when it determined that Nobles and Hales's acreage was not insurable, Nobles and Hales's state-law claims are inconsistent with FCIC regulations and therefore are preempted by federal law. RCIS does not argue that the FCIA wholly preempts state law; cf. Meyer v. Conlon, 162 F.3d 1264, 1268 (10th Cir. 1998) (per curiam) ("The FCIA does not wholly preempt state law; rather, it preempts state law inconsistent with the purpose of the Act."); instead, it makes a conflict-preemption argument based on language in the Tenth Circuit Court of Appeals's decision in Meyer, where the court explained that "[s]tate law applies to FCIA contracts, with two exceptions: (1) when FCIC contracts provide that state law does not apply and (2) when state law is inconsistent with FCIC contracts." (citing 7 U.S.C.A. 1506(1)). RCIS also cites an FCIC General Administrative Regulation, 7 C.F.R. § 400.352 (state and local laws and regulations preempted), for the proposition that lawsuits based on actions authorized or required by the FCIC regulations or the FCIA are preempted by federal law. That section reads, in pertinent part, "State or local governmental entities or non-governmental entities are specifically prohibited from ... (4) levy[ing] fines, judgments, punitive damages, compensatory damages, or judgments for attorney fees or other costs against companies ... arising out of actions or inactions on the part of such ... entities authorized or required under the Federal Crop Insurance Act, the regulations, any contract or agreement authorized by the Federal Crop, Insurance Act or by regulations or procedures issued by the Corporation (nothing herein is intended to preclude any action on the part of any authorized ... entity concerning any actions or inactions on the part of the ... company whose action or inaction is not authorized or required under the Federal Crop Insurance Act, the regulations, any contract or agreement authorized by the Federal Crop Insurance Act or by regulations or procedures issued by the Corporation)." 7 C.F.R. § 400.352(b)(4). RCIS argues that, because it was required by FCIC regulations to find that Nobles and Hales's land was uninsurable because it had not been farmed in one of the three years prior to 1999 their suit is preempted by federal law. RCIS's argument is flawed for two reasons. First, RCIS's argument misunderstands the basis of a number of Nobles and Hales's state-law claims. The key act underlying Nobles and Hales's fraud claim, for example, is not RCIS's denial of their insurance coverage, but is instead RCIS's act of telling them that their land was insurable. While RCIS maintains that it was required to find that 4,990 acres of Nobles and Hales's cotton crop were uninsurable due to FCIC rules, it certainly was not required to misrepresent to them that their land was insurable when in fact it was not. Similarly, the basis for Nobles and Hales's suppression-of-material-fact and negligence-and-wantonness claims is RCIS's failure to tell Nobles and Hales about ¶ 9(a)'s one-in-three requirement. Again, while RCIS may have been required under FCIC rules to find that 4,990 acres of Nobles and Hales's cotton crop were uninsurable, those rules did not require it to fail to tell Nobles and Hales about the requirements of ¶ 9(a). As such, 1298 Nobles and Hales's state-law fraud, suppression-of-material-fact, and negligence-and-wantonness claims fall under the parenthetical language in § 400.352(b)(4), which explains that "nothing herein is intended to preclude any action on the part of any authorized ... entity concerning any actions or inactions on the part of the ... company whose action or inaction is not authorized or required" under the FCIA or the FCIC rules and regulations. (Emphasis added). Second, RCIS's preemption argument generally misunderstands those situations in which state law is inconsistent with the FCIA. Under RCIS's argument, any time an insurance company denies a claim because it believes FCIC regulations require the claim be denied, any state-law claims by the party whose insurance claim was denied would be preempted by federal law. The Eleventh Circuit, however, rejected a similar argument, in Williams Farms of Homestead, Inc. v. Rain and Hail Ins. Servs., Inc., 121 F.3d 630 (11th Cir.1997). In that case, three plaintiffs sued private insurance companies after crop-loss claims under their MPCI policies were denied pursuant to language in the policies. Id. at 631. On appeal, the defendants argued that any state-law claims asserted against a private insurer are preempted by the FCIA. Id. at 632 33. After analyzing the plain language of the FCIA, the court rejected the defendants' argument, finding that "Congress intended to leave insureds with their traditional contract remedies against their insurance companies. Such remedies include a state law breach of contract claim.... The existence of a claim against a private reinsured company is therefore consistent with the scheme of the FCIA." Id. at 635. Similarly, the Tenth Circuit's decision in Meyer, which RCIS cites in support of its preemption argument, also requires a finding that Nobles and Hales's state-law claims are not preempted. In Meyer, the court looked at § 400.352(b)(4) and found that "the parenthetical language permits lawsuits based on agents' actions riot authorized by the FCIA or the FCIC ... [It allows plaintiffs suit] as he asserts that the defendants failed to honor the terms of an FCIC contract an action not authorized by the FCIA, the regulations, or the contract." Meyer, 162 F.3d at 1269. The court concluded that the plaintiffs state-law causes of action, including his claims of breach of contract, negligent misrepresentation and bad faith, were not preempted by the FCIA or FCIC regulations. Id. at 1270. Similar to those state-law claims in Williams Farms and Meyer, Nobles and Hales's state-law claims are not preempted by the FCIA or FCIC regulations. Essentially, Nobles and Hales are arguing that RCIS took three actions that were not authorized or required by the FCIA, the MPCI contract, or FCIC regulations: (1) it represented to them that their land was insurable; (2) it failed to tell them about ¶ 9(a)'s one-in-three requirement; and (3) it denied their claims under the MPCI and APO policies when it had no justifiable reason for doing so. Under the plain language of § 400.352(b)(4), and as explained in the Eleventh Circuit's decision in Williams Farms, these type of claims explicitly are not preempted by the FCIA or FCIC regulations. As such, Nobles and Hales's state-law claims cannot be dismissed as preempted by federal law, and RCIS's preemption argument must be rejected. B. Preclusive Effect of Arbitration Panel's Findings As a second preliminary matter, the court must determine what preclusive effect to give the arbitration panel's findings. After hearing the parties' evidence, the panel made three separate factual findings. 1299 First, it found that "The crop land at issue includes Farm Nos. 2301 and 2303 and totals 7,787 acres of land." Second, the panel found that "Under the terms of the policies, all of the crop land at issue was insurable and not excluded from coverage." Third, the panel found that "Plaintiffs relied in good faith upon the misrepresentation(s) of the defendant or the defendant's agents concerning the insurability of Plaintiffs' crop land." The Eleventh Circuit addressed the preclusive effect of an arbitration decision in Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352 (11th Cir.1985). In that case, the court explained that "[a]n arbitration decision can have res judicata or collateral estoppel effect.... When an arbitration proceeding affords basic elements of adjudicatory procedure, such as an opportunity for presentation of evidence, the determination of issues in an arbitration proceeding should generally be treated as conclusive in subsequent proceedings, just as determinations of a court would be treated." (Citations omitted). The court listed those requirements that must be met for the application of collateral estoppel to an, arbitration decision: "(1) the issue at stake must be identical to the one alleged in the prior litigation; (2) the issue must have been actually litigated in the prior litigation; and ($) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that earlier action .... In addition, the party against whom the earlier decision is asserted must have had a full and fair opportunity to litigate the issue in the earlier proceeding." Id. at 1360 (citations omitted); see also id. at 1361 n. 11.[4] The parties here do not dispute that the arbitration proceeding afforded them the basic elements of adjudicatory procedure. The arbitration was held pursuant to the rules of the American Arbitration Association, which provide for discovery and other procedural safeguards akin to those in a judicial proceeding, and the arbitration panel's order itself notes that the panel "considered the testimony of the witnesses, exhibits, relevant law, and the submissions and arguments of the parties." The court therefore will limit its inquiry to the three requirements for collateral estoppel: the issue before the court must be identical to that heard by the arbitration panel, it must have actually been litigated in the arbitration proceeding, and it must have been a critical and necessary part of the arbitration panel's judgment. An application of the requirements for collateral estoppel to the arbitration panel's first and second findings that the land at issue included 7,787 acres on farms 2301 and 2303 and that this land was insurable under both the MPCI and the APO policies shows that collateral estoppel bars RCIS from re-litigating the insurability of Nobles and Hales's land. First, that is the same issue that the arbitration panel addressed. This is shown not only by the panel's finding that coverage existed as to the 7,787 acres, but also by the scope of the arbitration provision to which the parties agreed. The terms and conditions of the MPCI policy, published at 7 C.F.R. § 457.8, ¶ 20(a), provide that, if the insured and the insurer "fail to agree on any factual determination, the disagreement will be resolved in accordance with the rules of the American Arbitration Association. 1300 Failure to agree with any factual determination made by FCIC must be resolved through the FCIC appeal provisions ...." As Judge DeMent noted in his order requiring arbitration, the factual determination made by RCIS and disputed by Nobles and Hales was "whether or not [RCIS] made a correct factual determination about Plaintiffs' land use." Nobles, 122 F.Supp.2d at 1296. The arbitration panel's express purpose, then, was to determine whether all or part of Nobles and Hales's land was insurable and, as a result, whether their land was covered by the MPCI and APO policies. Second, the parties do not dispute that this was the issue that was actually litigated in the arbitration proceeding. While RCIS does not agree with the arbitration panel's decision RCIS asserts in its summary-judgment motion that it "still believes said decision [that Nobles and Hales's land was uninsurable] was correct" (emphasis in original) it nowhere argues that this issue was not litigated in front of the arbitration panel. In fact, in its description of the procedural background to this action, RCIS recognizes that Judge DeMent's November 2000 order "specifically held that the factual disputes as to the existence of coverage for the cotton acreage in question were to be determined in arbitration." The court therefore has no reason to believe that the insurability of Nobles and Hales's land was not the issue actually litigated in the arbitration proceeding. Finally, it is clear that the arbitration panel's finding that all 7,787 acres of Nobles and Hales's land were insurable was a critical and necessary part of the panel's judgment; it was the specific question the panel was to answer. Thus, because the three requirements for collateral estoppel are met as to the arbitration panel's finding that all of Nobles and Hales's land was insurable and was covered by the MPCI and APO policies, the court finds that RCIS and Nobles and Hales are bound by that, factual determination. On the other hand, an application of the three requirements for collateral estoppel to the arbitration panel's third finding that Nobles and Hales relied in good faith on RCIS's "misrepresentation(s)" as to the insurability of their land shows that RCIS cannot be estopped from re-litigating this factual finding. In their motion for summary judgment, Nobles and Hales argue that RCIS should be estopped from re-arguing all of the arbitration panel's findings; RCIS argues in response that Nobles and Hales's interpretation of the arbitration panel's findings is erroneous.[5] Insofar as the panel found that Nobles and Hales relied in good faith on RCIS's "misrepresentation(s)," the parties cannot be estopped from challenging that finding because it does not meet the third requirement for collateral estoppel: it was not a critical part of the panel's judgment. It is true that Nobles and Hales's goodfaith reliance could have been presented to the arbitration panel, as Judge DeMent's order allowed the arbitrator "to grant recovery for losses even if they are not covered by the [insurance] policy if [Nobles and Hales] show that they relied in good faith upon a misrepresentation of an insurance agent. `Thus, even if the terms of Defendant's policy do not insure against losses on some 5,000 acres of Plaintiffs' cotton crop, the arbitrator may nevertheless 1301 award relief as if they do." Nobles, 122 F.Supp.2d at 1297 (footnote omitted). The arbitration panel's award, however, did not grant relief to Nobles and Hales because they relied in good faith on RCIS's misrepresentations. Instead, the panel explicitly found that "under the terms of the policies, all of the crop land at issue was insurable and not excluded from coverage." The panel's determination that Nobles and Hales relied in good faith on RCIS's "misrepresentation(s)" was not a critical part of its judgment even without this determination, the panel would have granted Nobles and Hales recovery because the 7,787 acres at issue were covered by the insurance policies therefore collateral estoppel does not prevent RCIS from litigating that issue. C. Merits 1. Breach of Contract Having found that Nobles and Hales's state-law claims are not preempted by federal law and that the parties are bound only by the arbitration panel's finding that all 7,787 acres of Nobles and Hales's land was covered by the MPCI and APO policies, the court now turns to the merits of Nobles and Hales's claims. Addressing Nobles and Hales's breach-of-contract claim (Count I) first, RCIS argues that it should be granted summary judgment on this claim because Nobles and Hales were awarded their full contractual damages in the arbitration proceeding, and therefore have had their breach-of-contract claim satisfied. Nobles and Hales have not responded to this argument in any way. In Alabama, damages for breach of contract "should return the injured party to the position he would have been in had the contract been fully performed. These damages are generally those that flow naturally from the breach. However, the injured party is not to be put in a better position by a recovery of damages for the breach than he would have been in if there had been performance." Smalley Transp. Co. v. Bay Dray, Inc., 612 So. 2d 1182, 1186-87 (Ala.1992) (citations omitted). Furthermore, it is clear that ordinarily neither punitive damages nor damages for emotional distress are available under Alabama law in breach-of-contract actions. Bowers v. Wal-Mart Stores, Inc., 827 So. 2d 63, 70 (Ala.2001) ("Except for the identified types of emotionally intertwined cases ... we have declined to extend emotional-distress damages to contract claims."); Geohagan v. General Motors Corp., 291 Ala. 167, 279 So. 2d 436, 438 (1973) ("In Alabama, as generally elsewhere, punitive damages are not recoverable for breach of contract."). Finally, the Alabama Supreme Court has found it proper to grant summary judgment where a plaintiff has already been fully compensated by the defendant for the available damages on his breach-of-contract claim. See Burch v. Lake Forest Prop. Owners' Ass'n, 565 So. 2d 611, 612 (Ala.1990) ("Because the [defendant] has already compensated [the plaintiff] for the notice period provided in the contract, summary judgment was proper."). In this case, the arbitration panel found that all of Nobles and Hales's land was insurable under both the MPCI and APO contracts and ordered that RCIS pay Nobles and Hales "all remaining unpaid indemnities under the insurance policies on the cotton planted on Farm Nos. 2301 and 2303 for crop year 1999." Therefore, Nobles and Hales have been returned to the position they would have been in had the contract been fully performed, and any additional recovery on their breach-of-contract claim would put them in a better position than if RCIS had performed the contract, in violation of Alabama law. See Smalley, 612 So.2d at 1187. Because Nobles 1302 and Hales have been made whole, and are not entitled to any further damages on their breach-of-contract claim, summary judgment is due to be granted in favor of RCIS on this claim. See Burch, 565 So.2d at 612. 2. Fraud and Negligent or Wanton Training Second, the court must grant summary judgment in RCIS's favor on two other claims asserted by Nobles and Hales fraud and negligent or wanton training because they are based on the assumption that part of Nobles and Hales's land was uninsurable under the MPCI and APO policies, when, in fact, as determined by the arbitration panel, all of Nobles and Hales's land was covered by those policies. In their complaint, as the basis for their fraud claim (Count III), Nobles and Hales allege that: "19. At the time plaintiffs purchased said cotton crop insurance policies issued by defendant RCIS, said defendant represented to the Plaintiff that if the plaintiffs complied with the terms and conditions of said cotton crop insurance policies as had been made known to the plaintiffs by the defendant and plaintiffs then suffered an insurable loss on their 1999 cotton crop, defendant RCIS would pay plaintiffs' loss according to the terms of said policies." "20. The representations made by Defendant RCIS were false and said defendant knew that they were false, or said defendant recklessly misrepresented the true facts, or said representations were made by defendant RCIS by mistake, but with the intention that plaintiffs should rely upon them." Similarly, Nobles and Hales's claim of negligent or wanton training (Count VI) is also based on the assumption that RCIS sold a policy to Nobles and Hales for land that was not insurable. Nobles and Hales's basis for that claim is that: "30. Defendant RCIS negligently and/or wantonly failed to properly inform, train and supervise its agent(s) and employee(s) involved in selling cotton crop insurance to the plaintiffs." "31. Therefore, defendant's agent(s) and/or employee(s), without adequate information, training and supervision from defendant RCIS sold plaintiffs crop insurance policies on cotton acreage that was otherwise uninsurable under the terms of said policies." Looking at it differently, if Nobles and Hales's land was insurable, they would have no support for either of these claims: RCIS's representation that their land was insurable would riot be fraudulent, and there would be no problem with RCIS's agents' or employees' sale of crop insurance policies to Nobles and Hales for their insurable land. Of course, as discussed above, the arbitration panel explicitly found that Nobles and Hales's land was insurable and therefore was covered by the MPCI and APO policies, and the court has found that collateral estoppel bars the parties from challenging this finding. As such, the court must act as though RCIS's representations to Nobles and Hales that their land was insurable necessarily were true, and that Nobles and Hales's land was covered by the MPCI and APO policies; the arbitration panel found just that. Thus, Nobles and Hales cannot sustain a fraud claim, because RCIS's representation that their land was insurable was truthful; neither can they sustain a negligent or wanton training claim based upon RCIS having sold them an insurance policy for land that was uninsurable, because all of Nobles and Hales's land was found by the arbitration panel to be insurable. 1303 The court will therefore grant summary judgment as to Nobles and Hales's claims of fraud and negligent or wanton training. Based on the preclusive effect of the arbitration panel's finding that Nobles and Hales's land was fully covered by the MPCI and APO policies, Nobles and Hales cannot sustain these claims. 3. Suppression of Material Fact and Negligence and Wantonness Third, the court must grant summary judgment in RCIS's favor on two other claims suppression of material fact (Count I) and negligence and wantonness (Count V) because they are based on RCIS's failure to inform Nobles and Hales about the ¶ 9(a)'s one-in-three provision. Under both Alabama and federal law, however, Nobles and Hales are charged with notice of the content of their policy as it appears in the Code of Federal Regulations, and therefore cannot maintain claims for suppression of material fact or negligence and wantonness that are based on RCIS failing to inform them of the provisions of that policy. The issue of whether Nobles and Hales had notice of the provisions of their insurance policy with RCIS has already been addressed by Judge DeMent, albeit with regard to the policy's arbitration provision rather than the ¶ 9(a)'s one-in-three provision. As Judge DeMent explained in his November 2000 order, "[i]t is undisputed that the [insurance] policies signed by plaintiff state that they are [s]ubject to the provisions of the Federal Crop Insurance Act and the regulations issued under that Act.'... These regulations are published in the Code of Federal Regulations." Nobles, 122 F.Supp.2d at 1300. Judge DeMent then stated that, just as farmers who contract directly with the FCIC are charged with knowledge of the relevant insurance regulations and policy provisions, farmers who buy FCIC-reinsured policies from private insurance companies should be charged with notice as well. Id. Finally, Judge DeMent held that, despite their argument to the contrary, Nobles and Hales were on notice of the arbitration provision in their insurance contract with RCIS. Id. at 1301. Judge DeMent's logic holds as true for ¶ 9(a)'s one-in-three provision as it did for the arbitration provision in Nobles and Hales's contract with RCIS. Just as the arbitration provision was published in the Code of Federal Regulations, the one-in-three provision at issue is also so published. See 7 C.F.R. § 457.8, at ¶ 9(a) ("Acreage planted to the insured crop in which you have a share is insurable except acreage: (1) That has not been planted and harvested within one of the 3 previous crop years ...."). Under both Alabama and federal law, Nobles and Hales are charged with notice of this provision. Alabama law provides that "where contracts contain extraneous references of fact and to other documents, ... the parties are bound thereby. And he who omits to inform himself as to ... [the] contents and extent of such other writing referred to, in so far as it is reasonable and in contemplation of [the] parties to [the] contract, is bound thereby." McDougle v. Silvernell 738 So. 2d 806, 808 (Ala.1999) (quoting Bates v. Harte, 124 Ala. 427, 26 So. 898 (1899)) (alterations in original). The insurance contract between RCIS and Nobles and Hales made clear reference to the FCIA and the regulations promulgated thereunder, and Nobles and Hales have given no reason why they should not be deemed, under Alabama law, to have had notice of the language in ¶ 9(a). Similarly, federal law, as explained in FCIC v. Merrill, 332 U.S. 380, 68 S. Ct. 1, 92 L. Ed. 10 (1947), charges Nobles and Hales with notice of the provisions in the Code of Federal Regulations. In Merrill, it was undisputed that an agent for the 1304 FCIC had told a farmer that his land was insurable, when under the FCIC regulations it was not. The FCIC denied the farmer's claim, and he brought suit. The Supreme Court found that the government was not bound by the erroneous representations of its agent, instead explaining that Congress, through the FCIA, explicitly limited the authority of the FCIC and its agents. Id. at 384, 68 S. Ct. at 3. The Court explained that the farmer was charged with notice of the terms of his policy, despite the agents's statements: "Just as everyone is charged with knowledge of the United States Statutes at Large, Congress has provided that the appearance of rules and regulations in the Federal Register gives legal notice of their contents." Id. at 385-86, 68 S. Ct. at 3. The Court concluded that "the ... Regulations were binding on all who sought to come within the Federal Crop Insurance Act, regardless of actual knowledge of what is in the Regulations or of the hardships resulting from innocent ignorance." Id. While Merrill dealt with a farmer who contracted directly with the FCIC, at least one other court has applied its holding to a case such as this, in which farmers bought policies from private insurers that were reinsured by the FCIC. See Walpole v. Great American Insurance Cos., 914 F. Supp. 1283, 1290 n. 12 (D.S.C.1994) (Norton, J.) (finding Merrill's holding "equally applicable to FCIC reinsured policies"). This extended application of Merrill's holding makes sense. See also Nobles, 122 F.Supp.2d at 1300 ("Walpole makes perfect sense."). As the Supreme Court explained in Merrill, its holding "merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury. The `terms and conditions' defined by the [FCIC], under authority of Congress, for creating liability on the part of the Government preclude recovery for loss ... no matter with what good reason the respondents thought they had obtained insurance from the government." Merrill, 332 U.S. at 385, 68 S. Ct. at 3-4. Because the MPCI policy bought from RCIS by Nobles and Hales is reinsured by the FCIC, any recovery under that policy will charge the public treasury; as such, like the plaintiff in Merrill, Nobles and Hales are strictly bound by, and are assumed to have notice of, the terms and conditions defined by the FCIC for creating liability on the part of the government. One of those terms and conditions is ¶ 9(a)'s one-in-three requirement. Thus, under both Alabama and federal law, Nobles and Hales are assumed to have had notice of the provisions of their MPCI contract, including ¶ 9(a)'s one-in-three provision. As such, they cannot maintain claims of suppression of material facts and negligence and wantonness that are based on RCIS's failure to inform them of that provision. 4. Bad faith Fourth, the court will grant summary judgment in RCIS's favor on Nobles and Hales's bad-faith claim because that claim is deficient as a matter of Alabama law. Nobles and Hales assert two bases for their bad-faith claim; they argue that RCIS acted in bad faith when it: (1) refused to pay their insurance claim as to the 5,860 acres for which RCIS found their land to be uninsurable; and (2) failed to investigate properly their insurance claim. In Alabama. "the plaintiff in a `bad faith refusal' case has the burden of proving: (a) an insurance contract between the parties and a breach thereof by the defendant; (b) an intentional refusal to pay the insured's claim; (c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason); (d) the insurer's actual knowledge of the absence of any legitimate or arguable 1305 reason; ... In short, [the] plaintiff must go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a nonpayment without any reasonable ground for dispute. Or, stated differently, the plaintiff must show that the insurance company had no legal or factual defense to the insurance claim." National Sec. Fire & Casualty Co. v. Bowen, 417 So. 2d 179, 183 (Ala.1982) (emphasis in original). The plaintiff's burden in making a bad-faith claim is a "heavy" one. Liberty Nat'l Life Ins. Co. v. Allen, 699 So. 2d 138, 142 (Ala. 1997). The Alabama Supreme Court has divided bad-faith claims into two categories: "normal" bad-faith claims and "unusual" or "extraordinary" bad-faith claims. In "normal" bad-faith cases, the Alabama Supreme Court has applied a "directed-verdict-on-the-contract-claim" standard; under that standard, "the proof offered must show that the plaintiff is entitled to a directed verdict on the contract claim and, thus, entitled to recover on the contract claim as a matter of law. Ordinarily, if the evidence produced by either side creates a fact issue with regard to the validity of the claim and, thus, the legitimacy of the denial thereof, the tort claim must fail and should not be submitted to the jury." Dutton, 419 So.2d at 1362. For a "normal" bad-faith claim, then, an issue of fact with regard to the validity of the plaintiff's insurance claim will prevent the bad-faith claim from being submitted to the jury. In other words, for a "normal" bad-faith claim, if there is genuine issue of fact as to whether the insurer legitimately denied the plaintiffs insurance claim, summary judgment should be granted rather than denied. See, e.g., S & W Properties v. American Motorists Ins. Co., 668 So. 2d 529, 533 (Ala.1995) ("All of the evidence ... suggests a dispute over a genuine issue of material fact. Therefore, the plaintiffs did not show that American Motorists had no legal or factual defense to the insurance claim ....[and] the judge properly entered the summary judgment for the insurer."). On the other hand, the Alabama Supreme Court has been somewhat more lenient with "unusual" or "extraordinary" bad-faith claims, finding that the directed-verdict standard does not apply to certain unusual cases. See National Ins. Ass'n v. Sockwell, 829 So. 2d 111, 128 (Ala.2002). "Unusual" bad-faith claims, however, have been limited to four types of claims: "those instances in which the plaintiff produced substantial evidence showing that the insurer (1) intentionally or recklessly failed to investigate the plaintiff's claim; (2) intentionally or recklessly failed to properly subject the plaintiff's claim to a cognitive evaluation or review; (3) created its own debatable reason for denying the plaintiff's claims; or (4) relied on an ambiguous portion of the policy as a lawful basis to deny the plaintiff's claim." Id. at 129-30 (citing State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala.1999)). It is the plaintiffs burden to establish that her bad-faith claim is an "unusual" one. Id. at 129. In this case, one of the bases that Nobles and Hales assert for their bad-faith claim is that RCIS failed to investigate their insurance claim. While Nobles and Hales's "failure to investigate" claim falls into one of those categories of bad-faith claims that could be considered "unusual" under Alabama law, Nobles and Hales have not argued that any part of their bad-faith claim is should be categorized as "unusual." In fact, beyond asserting in their complaint that RCIS failed to investigate their insurance claim, Nobles and Hales have nowhere argued that RCIS failed to investigate their claim, and have presented no evidence whatsoever to support their failure-to-investigate claim. As such, the court will treat both Nobles and Hales's "refusal to pay" claim and their failure-to-investigate 1306 claim as "normal" bad-faith claims under Alabama law, subject to the directed-verdict-on-the-contract-claim standard. Nobles and Hales's failure-to-investigate claim does not meet that directed-verdict standard, and summary judgment must therefore be granted on their bad-faith claim insofar as the basis for that claim is RCIS's failure to investigate Nobles and Hales's insurance claims. As noted above, Nobles and Hales have provided no evidence whatsoever, and do not argue in their summary-judgment response, that RCIS failed to investigate their insurance claim. See Holifield v. Reno, 115 F.3d 1555, 1564 n. 6 (11th Cir.1997) ("I [C]onclusory assertions ... in the absence of supporting evidence, are insufficient to withstand summary judgment."). In fact, the evidence requires just the opposite conclusion. RCIS has produced affidavits from two of its employees, Therese Steppel and Anthony Barnett, stating that RCIS investigated Nobles and. Hales's insurance claims and determined that 4,990 acres of their cotton crop were not insurable under the MPCI policy. Additionally, Steppel states in her affidavit that Nobles and Hales never requested indemnity on the 870 acres on farm 2301 until the arbitration proceeding, and RCIS has produced documentation signed by Nobles and Hales supporting this statement. This evidence is unrebutted by Nobles and Hales. Additionally, while RCIS did deny Nobles and Hales's claims as to 4,990 acres of their cotton crop, it granted their insurance claims under the MPCI and APO policies as to the remaining 1,927 acres for which they had purchased insurance. RCIS did this after not only analyzing FSA records, but also after separately determining that some of Nobles and Hales's land qualified under an exception to ¶ 9(a) and even interviewing other farmers to see if parts of Nobles and Hales's land not on record with the FSA had been farmed. The only reasonable conclusion that can be drawn from RCIS having denied Nobles and Hales's claim in-part and having granted it in-part is that RCIS investigated Nobles and Hales's claim, as RCIS maintains it did, and decided that part of their acreage did not meet the requirements of the MPCI policy. In other words, RCIS has presented facts to show why summary judgment is properly granted as to Nobles and Hales's failure-to-investigate claim there exists a reasonably legitimate or arguable reason for their denial of Nobles and Hales's insurance claim and Nobles and Hales have not rebutted RCIS's evidence with specific facts showing a genuine issue for trial, or even any argument as to why this claim should be sustained, The court will therefore grant summary judgment as to Nobles and Hales's bad-faith claim insofar as the basis for that claim is RCIS's failure to investigate their insurance claims. Although for different reasons, Nobles and Hales's failure-to-pay claim also does not meet the directed-verdict standard. RCIS maintains that it had a reasonable basis for denying Nobles and Hales's claims as to 4,990 acres on farm 2303 and that it did not know until arbitration about the 870 acres on farm 2301 for which Nobles and Hales claimed coverage. Under the terms of the MPCI policy, see 7 C.F.R. § 457.8, "Acreage planted to the insured crop in which you have a share is insurable except acreage: (1) That has not been planted and harvested within one of the 3 previous crop years," subject to some exceptions that none of the parties argues is applicable here. 7 C.F.R. § 457.8, at ¶ 9(a). RCIS has produced evidence, in the form of affidavits, supporting its argument that it investigated the farming history of farm 2303 to determine if that land was insurable under the terms of the MPCI policy specifically the "one-in-three" 1307 provision and was unable to find proof that 4,990 acres of Nobles and Hales's land had been farmed in one of the three years prior to 1999, or was otherwise exempt from the requirements of ¶ 9(a). Based on this finding, RCIS says that it concluded that those acres were uninsurable under the MPCI policy. RCIS has also produced affidavit evidence asserting that the APO policy provides for a payment only in addition to any made under the MPCI policy, and that it has no yield selection or guarantee of its own to trigger a loss. Because RCIS denied Nobles and Hales's claim as to 4,990 acres under the MPCI policy, then, it also denied their APO claim as to that acreage. Finally, RCIS has produced affidavit evidence and documentation supporting its claim that it did not know until the arbitration proceeding about the 870 acres on farm 2301 for which Nobles and Hales's claimed coverage. While the arbitration panel ultimately found that RCIS was incorrect when it determined that Nobles and Hales's land was uninsurable under the MPCI and APO provisions, it is clear from above that RCIS has presented arguable reasons for having denied Nobles and Hales's insurance claims. Cf. Attorneys Ins. Mut. v. Smith, Blocker & Lowther, P.C., 703 So. 2d 866, 871 (Ala.1996) (finding that summary judgment was properly entered as to bad-faith claim where insurance had arguable, but ultimately incorrect, reason for failing to pay claim). As to the MPCI policy, RCIS denied Nobles and Hales's claims because 4,990 acres of their land on farm 2303 had not been farmed in one of the three years prior to 1999, a requirement that was undeniably part of the MPCI policy, and because Nobles and Hales nowhere indicated on their insurance forms that they were also farming 870 acres on farm 2301. Nobles and Hales nowhere argue that their land actually was farmed in one of those years. In a bad-faith case such as this, however, Nobles and Hales can prevail only if they show the absence of any "reasonably legitimate or arguable reason" for RCIS's refusal to pay their claim. Bowen, 417 So.2d at 183; see also Liberty Nat'l Life Ins. Co. v. Allen, 699 So. 2d 138, 143 (Ala.1997) ("To defeat a bad faith claim, the defendant does not have to show that its reason for denial was correct, only that it was arguable."). Nobles and Hales "must show that the insurance company had no legal or factual defense to the insurance claim." Id.; see also Smith, 540 So.2d at 695 ("[I]f any one of the reasons for denial of coverage is at least `arguable' this court need not look any further, and a claim for bad faith refusal to pay the claim will not lie." (citation omitted)). Here, Nobles and Hales have not met their burden of showing the absence of a reasonably legitimate or arguable reason for RCIS to have denied their claim under the MPCI and APO policies, and summary judgment must therefore be granted in RCIS's favor on Nobles and Hales's bad-faith claim. An appropriate judgment will be entered, granting RCIS's summary-judgment motion and denying Nobles and Hales's motion. NOTES [1] Nobles and Hales filed a motion to amend their complaint on December 10, 2002, which the court granted insofar as it added claims against RCIS. Nobles v. Rural Community Ins. Servs., 303 F. Supp. 2d 1279 (M.D.Ala.2004). Instead of adding new claims against RCIS, however, that amended complaint simply asserted further bases for these claims against RCIS. [2] Nobles and Hales also planted peanuts and bought coverage for that crop from RCIS. The parties have no dispute regarding Nobles and Hales's peanut crop. [3] Judge DeMent, in his November 2000 order, already addressed and rejected RCIS's preemption argument, finding that the FCIA does not preempt their state-law claims. Nobles v. Rural Community Ins. Servs., 122 F. Supp. 2d 1290, 1295 (M.D.Ala.2000). RCIS has not shown why the law-of-the-case doctrine does not prevent it from making its preemption argument again in this case. See, e.g., Arizona v. California, 460 U.S. 605, 618, 103 S. Ct. 1382, 1391, 75 L. Ed. 2d 318 (1983) ("As most commonly defined, the [law-of-the-case] doctrine posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case."). In any event, the court agrees with Judge DeMent's conclusion. [4] The Greenblatt court also interpreted the Supreme Court's decisions in Dean Witter Reynolds v. Byrd, 470 U.S. 213, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985), and McDonald v. City of Branch, 466 U.S. 284, 104 S. Ct. 1799, 80 L. Ed. 2d 302 (1984), to require additional inquiries when "an important, nonarbitrable federal claim" is involved. Greenblatt, 763 F.2d at 1361. No federal claims are at issue in this litigation. [5] RCIS also argues that Nobles and Hales's motion is procedurally invalid, in that it seeks summary adjudication of specific facts rather than summary judgment as to any of Nobles and Hales's claims. Because the court must determine the estoppel effect of the arbitration panel's finding to resolve RCIS's motion for summary judgment, and because the court finds in RCIS's favor on that motion, the court need rot resolve the parties' dispute over the procedural validity of Nobles and Hales's summary-judgment motion.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/3517618/	The Board of Mayor and Aldermen of the City of Louisville adopted the following ordinance: "Section 1. Be it ordained, by the Board of Mayor and Aldermen of the City of Louisville, Mississippi, that it shall be unlawful for any person, firm, or corporation to sell, barter, exchange or give away or to have in his, her, or their possession or under his, her, their or its control firecrackers, roman candles, torpedoes, sky-rockets, or any other explosives commonly called fireworks within the City of Louisville, Mississippi. "Section 2. Be it further ordained, that any person, firm, or corporation violating any of this ordinance, shall upon conviction thereof, be punished by a fine of not less than $50.00 nor more than $100.00 or by imprisonment in the city jail not less than 10 days nor more than 30 days, or both such fine and imprisonment." Appellant, a merchant of the city who, among other things, dealt in fireworks in the City of Louisville, was arrested on an affidavit charging violation of this ordinance, in the following language: "C.E. King did wilfully and unlawfully have in his possession and under his control firecrackers, roman candles, explosives, commonly called fireworks in the City of Louisville, Winston County, Mississippi, against the ordinances of the City of Louisville, State of Mississippi." Page 621 He was tried and fined in the Mayor's Court, and upon appeal to the Circuit Court was convicted, and again fined, and has appealed here. There is an agreed statement of facts in the record: that the procedure in the passage of the ordinance was regular; that appellant did have in his possession and under his control in his place of business in the City of Louisville, on the date named in the affidavit, and exhibited therein for sale, firecrackers, roman candles, and explosives commonly called fireworks; that the city contends the ordinance to be a valid, binding and legal ordinance and a reasonable regulation of police power in the prevention of fire hazards, and in controlling of nuisances, and is proper under the police power of the City of Louisville, and that the defendant presents his motion to quash to the Court. In an opinion dictated into the record by the trial judge, he said: "The city claims only that the defendant had these fireworks in his possession. Therefore, the whole case turns on whether or not the City of Louisville has the constitutional power as an incorporated municipality to prohibit all possession of firecrackers and roman candles within the municipality. If this ordinance is unconstitutional clearly the defendant should be acquitted. If it is constitutional, the defendant admits that he did have the fireworks in his possession." Thereupon, the court overruled the motion to quash, accordingly, and fined the appellant as stated, supra. However, the ordinance was attacked on other grounds than its lack of constitutional sanction. Among such grounds are, that the affidavit does not charge an offense punishable by the City of Louisville; that the City of Louisville does not have the authority to pass an ordinance prohibiting the possession, sale, etc. of fireworks; that the ordinance, in undertaking to outlaw the possession, sale, etc. of fireworks is void on its face for the reason that the possession, sale, etc. of fireworks is not per se a nuisance; the possession, sale, etc. of fireworks being recognized by statute as being lawful in this state, Page 622 the said municipal authorities were without authority to prohibit the possession, sale, etc. of fireworks; and, that such ordinance is not authorized by statute, either Section 3447, Code 1942, or any other section, granting municipalities authority in this connection. Section 3411, Code 1942, is the statute authorizing the municipalities to adopt "ordinances prohibiting within the corporate limits the commisson of any act which amounts to a misdemeanor under the laws of the state." This statute further provides that a municipality may make all needful policeregulations (italics supplied) necessary for the preservation of good order and peace of the municipality and to prevent injury to, destruction of, or interference with public or private property; to regulate or prohibit (italics supplied) any mill, laundry or manufacturing plant from so operating whereby the soot, cinders, or smoke therefrom, or the unnecessary noises thereof, may do damage to or interfere with the use or occupation of public or private property. It is to be noted that this section of the Code permits only two kinds of prohibition, one against mills, laundries, and manufacturing plants, in the instances enumerated, and the other against commission of state misdemeanors in the city limits adopted by ordinance as also misdemeanors against the municipality. We have held that (Hn 1) a city has power to pass an ordinance making any act amounting to a misdemeanor, under the state laws, an offense against the municipality. Rosetto v. City of Bay St. Louis, 97 Miss. 409, 52 So. 785; Richards v. Town of Magnolia, 100 Miss. 249, 56 So. 386. This state has no statute, which we have been able to find, or which has been called to our attention, which makes it a misdemeanor for "any person, firm, or corporation to sell, barter, exchange or give away or to have in his, her, their possession or under his, her, their, or its control firecrackers, roman candles, torpedoes, sky-rockets, or any other explosives commonly called fireworks." Page 623 (Hn 2) The only statute in the Code dealing expressly with prohibition of fireworks is Section 2156, Code 1942, which provides that it shall be unlawful to explode any "firecrackers, roman candles, sky-rockets or any kind of fireworks in anyunincorporated town or village (italics supplied) in this state, within three hundred yards of any railroad depot, and cotton or hay warehouse or any cotton-yard." A violation is made a misdemeanor. Obviously, this statute does not justify the ordinance of the City of Louisville under consideration before us. Louisville is an incorporated municipality. Even the foregoing section does not prohibit sale or possession of fireworks altogether, but only regulates their explosion within certain areas of the unincorporated town or village. It is to be borne in mind that the ordinance in the case at bar absolutely prohibits the sale, possession, or control of fireworks by any person, firm, or corporation throughout the municipality. The assignment of errors on the appeal claims that the trial court erred in holding the ordinance valid; erred in pronouncing it constitutional; and erred in finding appellant guilty. On the issue of constitutionality, the case of Town of McCool v. Blaine,194 Miss. 221, 11 So. 2d 801, is cited by appellant, but appellee does not discuss the matter. Since in our opinion the(Hn 3) ordinance is invalid for the reason that it is unreasonable, and is not authorized by any state statute making the offense therein described a misdemeanor against the state, we avoid the necessity of decision of the constitutionality of the ordinance. Let us first consider the question, is this ordinance a reasonable exercise of authorized municipal police power? (Hn4) Municipalities have only such authority to adopt ordinances as is granted them by the State. In determining this matter, we have held that "`Into every . . . power given a municipality to pass by-laws or ordinances there is an implied restriction that the ordinances shall be reasonable, consistent with the general law, and not Page 624 destructive of a lawful business.' Johnson v. Town of Philadelphia, 94 Miss. 34, 47 So. 526, 527, 19 L.R.A., N.S., 637, 19 Ann. Cas. 103." Knight, Chief of Police v. Johns, 161 Miss. 519,137 So. 509, 510. (Hn 5) Is a merchant, having fireworks in his possession or under his control, for purposes of sale, engaged in a lawful business? We think so for two reasons, first, no state law prohibits it; and, second, a privilege tax is levied thereon by Section 9696 — 77, Code 1942, which supersedes Section 9508, Code 1942. The appellee argues that this is insufficient to make it a lawful business because of Section 9696, Code 1942, as brought forward in supplement as Section 9696 — 215. The latter provides that, "The issuance of a privilege license, or the payment of a tax required therefor, shall not make lawful any business, employment, transaction, article or device, or the operation thereof, contrary to any statute of this state, or any ordinance of any municipality thereof." In support of this contention, appellee cites the slot machine case, Atkins v. State, 178 Miss. 804,174 So. 52. However, the opinion of this Court pointed out that under Section 821, Code 1930, it was unlawful to operate any slot machine or similar devices, the one involved in that case being adjudicated to be a gambling device. There is no state law prohibiting possession of fireworks, and there is no municipal ordinance of the City of Louisville prohibiting same, unless we uphold the ordinance set out, supra, which we have stated we could not do. Moreover, appellant cites Crittenden v. Town of Booneville,92 Miss. 277, 45 So. 723, 131 Am. St. Rep. 518, dealing with the then operation of billiard tables and poolrooms, wherein we held that such operation was not wrong per se; and by Section 3778, Code 1906, was made the subject of a license or privilege tax; and, therefore, Code 1906, Section 3340, giving municipalities power to regulate and suppress them, authorized their prohibition only when so conducted as to become a nuisance, even though Section 3893 did provide that the payment of a Page 625 license or privilege tax shall not legalize any business. Furthermore, we there declared that (Hn 6) powers delegated by the Legislature to municipalities are intended to be exercised in conformity to, and consistent with, the general laws of the State, and are to be construed most strongly against a power or right claimed but not clearly given, and an ordinance prohibiting a properly conducted lawful business, the subject of a license tax is void. See also Kosciusko v. Slomberg, 68 Miss. 469, 9 So. 297, 12 L.R.A. 528, 24 Am. St. Rep. 281; Ex Parte O'Leary,65 Miss. 80, 3 So. 144, 7 Am. St. Rep. 640; City of Jackson v. Newman, 59 Miss. 385, 42 Am. Rep. 367; Knight, Chief of Police v. Johns, 161 Miss. 519, 137 So. 509. Volume 37, Am. Jur., Municipal Corporations, Section 165, states that, "Applying the principle specifically, it has often been held that a municipality cannot lawfully forbid what the legislature has expressly licensed, authorized, permitted, or required, or authorize what the legislature has expressly forbidden." In the case of City of Amory v. Yielding, 203 Miss. 265, 34 So. 2d 726, we held that a municipality by ordinance cannot validly expand or contract the application of a statute defining a misdemeanor. It is constantly to be borne in mind that this ordinance makes a municipal misdemeanor out of something which is not so classed by any state statute, and hence not authorized by Section 3411, Code 1942, granting municipalities power "to adopt ordinances prohibiting within the corporate limits the commission of any act which amounts to a misdemeanor under the laws of the state." (Hn 7) This ordinance, furthermore, is not a regulation, but a city-wide prohibition of a lawful business. Appellant claims it is authorized by Section 3435, Code 1942, which authorizes ordinances for prevention and extinguishment of fires. An examination of this section reveals it is regulatory, and makes no reference to fireworks. Page 626 Or by Section 3447, Code 1942, governing municipal regulations to prevent fires. This latter statute grants a city the power to "regulate the storage of powder, pitch, turpentine, resin, hemp, hay, cotton, and all other combustible and inflammable materials . . ." (Emphasis ours.) The ordinance before us regulates nothing, but prohibits a legitimate business. The basic ingredient of fireworks is "powder", but that is only a part of the completed article, and even in dealing with the highly explosive commodity, "powder", the legislature has seen fit to empower only municipal regulation of storage. Appellee also relies on Section 3401, Code 1942, dealing with municipal regulations regarding general health, and to prevent, remove and abate nuisances. Since the Legislature has not prohibited the possession of fireworks, they are not mala prohibita, and since of themselves alone they are harmless, they are not mala in sese, we think the foregoing statutes do not authorize this prohibitory ordinance. Prohibition is not regulation but destruction. We said in Moore et al. v. Grillis, 205 Miss. 865, 39 So. 2d 505, 509: "Regulation, it seems to us, is one thing, but prohibition of doing a thing, thereby eliminating the practice to be regulated, is another thing entirely." Appellee cites Chappell, et al. v. City of Birmingham, 236 Ala. 363,181 So. 906, wherein the Alabama Supreme Court is in apparent disagreement with us, but basing our opinion upon the Mississippi authorities to which we have referred above, we adhere to our views. In our discussion of regulation, as distinguished from prohibition, we are not to be taken as thereby forecasting what view we will take as to any ordinance, other than the one now before us. (Hn 8) We hold that this ordinance is void, because it is not in conformity to, and consistent with, the general law of the state; is unreasonable; and prohibits (so far as this record shows) a properly conducted lawful business, *Page 627 the subject of a license tax. Crittenden v. Town of Booneville, supra. We are therefore constrained to reverse the judgment of the circuit court and discharge the appellant. Reversed and appellant discharged.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/3278191/	I concur, but base my concurrence wholly on People v. Keenan,13 Cal. 581, and People v. Green, 99 Cal. 564, [34 P. 231], which I deem as binding on this court.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/3517619/	* Corpus Juris-Cyc References: Criminal Law, 16CJ, p. 458, n. 76; p. 489, n. 11; p. 574, n. 56; p. 825, n. 85; 17CJ, p. 55, n. 98 New; p. 58, n. 17; p. 74, n. 87; Discretion of court as to continuance to procure absent witness, see 6 R.C.L. 556; 2 R.C.L. Supp. 154; 4 R.C.L. Supp. 425; 5 R.C.L. Supp. 355. In the circuit court of Lauderdale county appellant was convicted of assault with intent to kill and murder, and sentenced to the penitentiary for ten years. Page 681 The indictment charged that the assault with intent to kill and murder was upon one "A.C. Parnell and Ernest Danner, by then and there discharging a deadly weapon, to-wit, a pistol, at and toward the said A.C. Parnell and Ernest Danner, with the willful and felonious intention and in a willful and felonious attempt them, the said A.C. Parnell and Ernest Danner, to unlawfully, willfully, feloniously, and of his malice aforethought to kill and murder." To this indictment defendant interposed a demurrer, the second ground of which is in this language: "Because said indictment, having only one count in the same, charges two offenses, in that it charges an unlawful, willful, and felonious assault upon both A.C. Parnell and Ernest Danner." The record contains no objection or exception to this amendment. Neither does the record show that the court ever took any action upon the demurrer, which, likewise, was filed on August 7, 1925, and no effort on the part of the defendant to have the demurrer disposed of; nor does it appear that the court had called to its attention the demurrer, save and except what may be inferred from the amendment permitted by the court's order. When the case was called for trial, the state having announced ready, defendant made a motion for a continuance, and undertook to have the case passed also because he said that Thelma Walker, a material witness living in Birmingham, Ala., at 1105 Seventh Avenue, was not present although he had made due and diligent effort to secure her presence; that her testimony was material; and that she would swear, if present, that Boatwright, the defendant, was actually present in her home, two miles from the scene of the alleged shooting, and that he was there from about the time of the shooting until five o'clock the next morning, and because of the distance of her home from the scene of the shooting it would have been impossible for him to have been present and participated in the shooting affray. Defendant said that these Page 682 facts were material to establish a complete alibi; that he had no other witness by whom he could prove these facts so fully; that he did not employ a lawyer under August 6th, the trial being on the 7th, and that his lawyer did not understand that Thelma Walker was imperatively needed as a witness until that time; that they had wired Thelma Walker to come to Meridian immediately, but that they had had no answer for her, and concluded his affidavit for the passing of the case, or its continuance, by saying that he believed that he would be able to have her in court the next week. The court, in passing upon this motion for the postponement or continuance of the case, said that the case was set for trial on Monday, and the defendant and his family were notified and the court was advised by the circuit clerk that the lawyer in Birmingham was notified by wire that the case would be called Monday for trial. On that day, when the case was called, the defendant being without counsel, he was directed to furnish the clerk with a list of his witnesses, and advised by the court that he would have to go to trial and that he had better procure counsel; that further time was granted on Monday; that the case had been called every day during the week and was then being tried, on Saturday, the sixth day of the court; that Birmingham was only about five hours' ride from Meridian, where the case was being tried. Briefly stated, the facts attendant upon the shooting are about as follows: Two police officers, Parnell and Danner, and several constables had repaired to a point about two miles southwardly from the city of Meridian, where they had information that whisky had been thrown from a train before, and would be on that night thrown from train No. 2, going northwardly, toward Meridian. So arranging themselves in two groups, the two police officers, Parnell and Danner, being together, they stationed themselves on the right of way forty or fifty feet from the railroad track, to await the coming of the train about eleven o'clock on Page 683 the night of the 20th of June, 1924; that when the train passed, they saw a negro named Hezekiah Clay throw three kegs of whisky off of the front vestibule of the negro coach, and immediately after the train had passed, which was running about twenty or twenty-five miles an hour, the defendant appeared upon the scene, passing on to where one keg of whisky was, which was farther away from them; that the defendant took up the keg of whisky and carried it away on his shoulder, and was gone seven or eight minutes; that the two officers then moved down in close proximity to the second keg, and when the defendant came back he came toward where the second keg had landed, and stopped. The officers, thinking he had discovered them, arose, flashed their flashlights upon him, and ordered him to throw up his hands and consider himself under arrest. To this order of the officers the negro responded by firing several shots at the officers. Officer Danner claimed that he was shooting at him (Danner). The officers responded to the negro's shots with a volley, each of them discharging his gun. No one was wounded. The negro ran off toward the mountains. Later, the sheriff was summoned, and Jenkins and two bloodhounds were placed upon the trail. Both officers testified that they recognized the defendant, Son Boatwright; that they knew him; and that he was the one who discharged the shots at Danner on that occasion. The bloodhounds trailed toward the mountains in the direction which the officers said their assailant had gone, and finally, at four o'clock in the morning, they trailed to the home of defendant's mother, about a block and a half from Thelma Walker's house, where the defendant says he was living with Thelma Walker in concubinage. Defendant objected to the testimony of Jenkins, the man in charge of the dogs, as to the action of the dogs, his objection being by general objection, until the conclusion of the examination when the objection was made more specific by saying that the "proper predicate" had not been laid for the introduction of the bloodhound testimony. Page 684 Thereupon the court asked counsel to specify in what particular the predicate had not been laid, and, responding, no specific objection to the predicate for the introduction of the bloodhound testimony was offered the court, by defendant's counsel. The defendant offered several witnesses, which, if believed by the jury, did establish an alibi for the defendant, but the defendant was not arrested until some months thereafter, when he was arrested by the officers in Birmingham, Ala., and returned to Mississippi for trial. The negro said he ran because he was scared; that he had heard two carloads of policemen were looking for him. He denied emphatically all knowledge of the crime. The first assignment of error is as to the demurrer. As the court made no order disposing of the demurrer, and defendant did not object to the order permitting the indictment to be amended, we take it there is nothing in the point now that the indictment was amended so as to strike out the name of A.C. Parnell. No reason or authority is cited to us for considering this point in this state of this record. Second, as to the motion for a continuance or postponement of the case, it was shown that Thelma Walker resided in Birmingham, Ala., within five hours' train ride of the place of trial; that the case was passed from day to day, from Monday until Saturday, and we do not think there was any abuse of the sound judicial discretion vested in the circuit judge in overruling this motion for postponement or continuance, and we cannot predicate reversible error upon the court's failure to grant further time. The error predicated upon the bringing of three large kegs of intoxicating liquor before the jury, thereby tending to show the commission of a separate offense or a distinct crime, was not error in this case for the record shows that defendant counsel called attention to the fact that there were three kegs of liquor, which he presumed to be whisky, and objected to this "stuff" being before Page 685 the jury. So that whatever harm there was in the jury's seeing the kegs of liquor was first emphatically called to the attention of the jury by the defendant himself before a word of testimony had been introduced. However, we think it was proper to introduce these kegs of liquor in evidence in this case because the state's theory was that this defendant shot at the officers when they were undertaking to arrest him for having in his possession a keg of liquor, a crime committed in their presence, and, without citing authorities, this is one of the cases in which the two crimes are so interlocked as that the kegs of liquor were a part of the shooting affray, and in explanation of what led to it, and the answer is twofold: First, that defendant counsel himself called attention to the kegs of whisky before the trial started; and, second, the kegs of whisky which the defendant was busily engaged in taking into his possession at and immediately before the time of the shooting clearly make the kegs of whisky a part of theres gestae of this case. Council cites no authority, but is very insistent that these kegs of whisky were damaging to the defendant's interest. However much or little it may have damaged defendant's interest, we do not see anything improper in the introduction of these articles before the jury. They tended to show the commission of the crime for which the officers were trying to make the arrest, which crime they said was committed in their presence by this defendant, Boatwright, whom they identified positively. The objection to the testimony of J.S. Jenkins as to the trail of the dogs from the scene of the crime, about the mountains, and to the home of defendant's mother, raises the question that there should have been testimony showing the proper training and pedigree of these dogs. Our views upon this question have been recently restated and are aligned with the well settled views years before set out by this court; but when the trial court called upon counsel to specify in what particular he objected to the testimony and in what particular the predicate had not Page 686 been laid, counsel did not then point out to the court, as we think he was called upon to do, his ground of objection to the testimony offered. It is unnecessary for us to again bring forward the many opinions of this court holding that general objections to testimony will not be sufficient to secure from this court rulings upon particular points urged here which were not presented to the lower court. The question of the weight of the bloodhound testimony in this case was for the jury entirely, in view of the testimony of the defendant and his several witnesses on his alibi. Upon the whole record we are convinced that the defendant has had a fair and impartial trial, and that the issue of whether he was the man who committed the crime has been fairly submitted to the jury, and we do not think this record contains any evidence that any injustice was done defendant in any of the rulings of the court below, and if the defendant did fire his automatic pistol at the officers of the law in the discharge of their duty in undertaking to arrest him for the commission of a crime, he should be punished therefor. The jury have found that the identification was complete, which was practically the only issue presented to them, and we see no reason to disturb it. Affirmed.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/3523080/	Injunction instituted in the Circuit Court of the City of St. Louis, Missouri, having for its purpose the perpetual prevention of the enforcement, by the city authorities, of Ordinance No. 28367, designed to regulate the moving of household goods, furniture, pianos, stock, fixtures, equipment, personal property and effects from one location to another within the City of St. Louis, or to or from any location within said city, requiring the owner or person in charge or control of the vehicles used to transport such property, to notify the City Register of such removal, and requiring him to keep an appropriate public record of such information. Said ordinance reads as follows: "Be it ordained by the City of St-Louis as follows: "Section One. It shall be the duty of all persons, firms, or corporations, owning or operating, any moving van, furniture car, transfer wagon, delivery wagon, express wagon or any other vehicle, who shall haul or move, or cause to be hauled or moved, any article of household goods, furniture, pianos, stock, fixtures, equipment, personal property and effects from one location to another within the City of St. Louis, or to or from any location within the City of St. Louis, where it shall be the intention of the owner, or person having the charge, custody, possession and control of such property, to change the residence or place of business of such person, firm or corporation, to notify the City Register of the City of St. Louis, within ten days after such removal, of the name of such person, firm or corporation owning, or having Page 414 the custody, possession and control of such property, the street address or location from and to which such property was removed, a brief, general description of the property removed, the date of such removal, and the name and address of the person, firm or corporation, owning or operating vehicles used in such transportation. "Section Two: It shall be the duty of the City Register to furnish the blanks necessary for making such reports, which shall be uniform and may be in the form prescribed by him, and he shall provide and maintain in his office a proper register, book, card index, or other appropriate record of such reports, which records shall be open to the public at all reasonable hours. "Section Three: It shall be the duty of every person, firm or corporation, to provide and give true information to the person, firm or corporation owning or operating the vehicles used in the transportation of property as contemplated by this ordinance, such as will enable such owner or person in charge of such vehicles to effectually comply with the giving of the notices and filing of the reports required by this ordinance. "Section Four: Any person, firm or corporation, violating any of the provisions of this ordinance, shall be deemed guilty of a misdemeanor, and upon conviction thereof, shall be fined not less than ten dollars nor more than one hundred dollars, for each and every offense. "Section Five: All ordinances, or parts of ordinances in conflict with this ordinance, to the extent of such conflict, are hereby repealed." Approved November 26, 1915. Said ordinance is assaulted in plaintiff's petition as being invalid because it contravenes the Federal and State constitutions, Article 4, section 1, and Article 2, section 30, respectively, which provide that no citizen shall be deprived of life, liberty or property without due process of law. It is further asserted that neither the laws of the State nor the city charter authorize the adoption of said ordinance by the municipal assembly and Page 415 the mayor of said city, and that it is unreasonable and oppressive. The petition then proceeds to allege that although said ordinance is invalid the city authorities are threatening to enforce the same, and to prosecute plaintiff, his agents and servants; that the enforcement thereof and such prosecution would result in irreparable damages to plaintiff and his business and property; that he has no adequate legal remedy to which he may resort and is, therefore, remediless in the premises unless he may resort to the equity side of the court and by injunction permanently restrain and enjoin all concerned from in anywise interfering with plaintiff, his agents and servants in the conduct of his business, and from arresting and prosecuting plaintiff, his agents and servants in the event they be of the notion to disregard the provisions of said ordinance, and for all additional relief the court may, in right and justice, think he should have. Defendants raised no question as to the sufficiency of the petition, but answered to the merits by a general denial of all averments of the petition, except it was admitted that said city was a municipal corporation duly organized under the Constitution and laws of the State of Missouri; admitted the official capacity of defendants, admitted the due adoption of said ordinance and that its violation subjected the offender, upon conviction thereof, to prosecution and fine. Defendants plead, affirmatively, that the City of St. Louis was authorized and had the power under the Constitution of Missouri, and under its charter powers and other laws, to enact, through its board of aldermen and mayor, the said Ordinance No. 28367, and that said ordinance was duly enacted as aforesaid pursuant to said powers, and pray to be hence dismissed without day and that the costs be adjudged against plaintiff. The case was tried before Judge Glendy B. Arnold who sustained plaintiff's petition; made said injunction perpetual, decreed said ordinance, and every section Page 416 thereof, null and void, and perpetually enjoined and restrained defendants from interfering in anywise with plaintiff's business as the owner and operator of said moving vans, and enjoined and restrained defendants from arresting and prosecuting plaintiff, his agents and servants, or any of them, for any alleged violation of said ordinance, and that plaintiff recover his costs. Motion for new trial was duly filed and continued to the December term, 1916, when it was overruled, exceptions saved, and the cause duly appealed to this court. I. It is contended by plaintiff, in his petition, that said ordinance contravenes the Federal and State constitutions as above set out, and in support of this contention cites St. Louis v. Dreisoerner, 243 Mo. 217-224. In that case it was held, and very properly so, that the city could not byConstitutionality. ordinance confiscate private property for aesthetic purposes, The case in hand presents no facts of that sort, and hence said case has no application here. Said ordinance is a criminal one, requiring plaintiff to keep a record on blanks furnished him by the City Register for the purpose of making the reports as required by said ordinance to said City Register, who shall keep a proper record thereof in his office, and which shall be open to the public at all reasonable hours. In the case of St. Louis v. Baskowitz, 273 Mo. 543, "Junk Merchants" were licensed and regulated by ordinance, and a registry was required to be kept of all purchases and sales and an accurate description, so far as may be, of marks, brands, letters or words of identification thereon, if any such there be, and such book of registry shall be kept open at the Register's office of said city, for the inspection and examination of the police or any citizen. This is on all-fours with the requirement of the ordinance in hand. The same point as to its being unconstitutional was made as in the instant case and it was held to be constitutional. We rule that the ordinance in question is constitutional. Page 417 II. It is contended that said ordinance was adopted without authority of the city charter. The charter provides, Article 1, Subdivision 23 of Section 1, page 13, as follows: "ToCharter license and regulate all persons, firms, corporations,Powers. companies and associations engaged in any business, occupation, calling, profession or trade;" and Subdivision 35 of said Article 1, Section 1, page 15, provides as follows: "To exercise all powers granted or not prohibited to it by law or which would be competent for this charter to enumerate." It cannot be presumed that the city was ignorant of its charter powers or that it deliberately intended to violate the organic law of the State or city, [State ex rel. v. Sheehan, 269 Mo. l.c. 427; State ex rel. Aull v. Field, 112 Mo. 554; Glasner v. Rothschild, 221 Mo. l.c. 211; Perry v. Strawbridge, 209 Mo. l.c. 645; 31 Cyc. 1106; Grimes v. Reynolds, 184 Mo. 679; Laclede Const. Co. v. Moss Tie Co., 185 Mo. l.c. 62; State ex. rel. v. Public Service Comm., 270 Mo. l.c. 442.] We rule the adoption of said ordinance was well within the charter powers conferred upon said city. III. Subdivision 25 of Article 1, Section 1, page 11, of said charter provides that the city has power "to define and prohibit, abate, suppress and prevent or license and regulate all acts, practices, conduct, business, uses of property and all other things whatsoever detrimental . . . to the inhabitants of the city." Where an ordinance is legally passed with due authority under the organic law of the State and city, the courts will not declare it unreasonable unless no difference of opinion can exist upon the question. A clear case must be made to authorize the courts to interfere on that ground. [St. LouisReasonableness. v. Weber, 44 Mo. 547; Gratiot v. Ry. Co., 116 Mo. 450.] "So also a municipal corporation may require the owners of public moving vans to file with the police commissioners a report of the persons for whom they move household goods and the place from and to which *Page 418 the goods are taken," (19 R.C.L. p. 861, par. 162); and in the cases of Lawson v. Judge of Recorders Court, 175 Mich. 375, and Lawson v. Connolly, 141 N.W. 623, it is held that ordinances of the same purport as the ordinance in question are not unreasonable, and cannot be avoided on that ground. IV. The foregoing disposes of the vital questions disclosed by the record, with the result that the decree of the court nisi will be reversed. It is so ordered. White, C., concurs;Railey, C., not sitting.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/8569592/	277TEXTO COMPLETO DE LA SENTENCIA I El 12 de septiembre de 2002, Janssen Ortho-LLC (“Janssen”) presentó una petición de certiorari (KLCE-2002-00952) solicitando la revocación parcial de la Resolución emitida el 12 de agosto de 2002, notificada el 13 de agosto, por el Tribunal de Primera Instancia, Sala Superior de Caguas, (el “777”) en el caso Rafael A. Gómez Pagán v. Janssen Ortho-LLC, Civil Núm. EAC2000-0013 (402); sobre: discrimen y daños. En ésta se aprobó una partida de gastos por nueve mil treinta y dos dólares ($9,032) de los cuales ocho mil ochocientos cincuenta dólares ($8,850) corresponden a honorarios periciales. El TPI indicó que concedía los honorarios periciales como costas por entender que “[pjara que el demandante prevaleciese demostrando su inhabilidad laboral y la razón de su renuncia al puesto, el testimonio del Dr. Jaime Del Toro fue esencial”. Por otro lado, el 14 de octubre de 2002, Rafael A. Gómez Pagán (“Gómez Pagán”) y su esposa Olga Iris Tirado presentaron un Escrito de Apelación (KLAN-2002-01070) solicitando la revisión y aumento de la cuantía fijada en concepto de compensación por los daños físicos, morales y las angustias sufridas por Gómez Pagán en la Sentencia Enmendada en Reconsideración dictada el 9 de septiembre de 2002, archivada en los autos copia de su notificación el 12 de septiembre. A su vez, en esa misma fecha 14 de octubre de 2002, Janssen presentó una Apelación (KLAN-2002-01072) solicitando la revocación de la Sentencia Enmendada en Reconsideración a la que hicimos referencia anteriormente. En unión a su recurso presentó una Moción en Solicitud de Consolidación y en Cumplimiento de Resolución. En Resolución de 15 de noviembre de 2002 ordenamos la consolidación de los recursos KLAN-2002-01070 y KLAN-2002-01072 con el KLCE-2002-00952. En la Sentencia Enmendada en Reconsideración, en su parte dispositiva, paginas 10 y 11 el TPI, concluyó como sigue: “Aquí existió un perjuicio evidente. Si se considera que hubo un curso de discrimen hacia el demandante. 278 Que éste se vio afectado sustancialmente en su vida resulta razonable una compensación por daños patrimoniales de $232,436.40 en salarios dejados de devengar a partir de que se vio forzado a dejar el empleo y hasta la edad de 62 años cuando pensaba jubilarse. Asimismo, los daños morales y en su persona se valoran en $40,000 más la doble penalidad estatutaria. En lo que respecta a la codemandante, ésta no demostró una causa de acción independiente. Aunque dijo haber requerido tratamiento médico, no expresó con datos concretos ese extremo. Tampoco lo del abandono del empleo, pues lo hizo dos años después del retiro del esposo y cuando él se hallaba estabilizado. Tratándose de una reclamación bajo la Ley Núm. 100, supra, los honorarios de abogado son el 25% de la cantidad básica concedida a Rafael A. Gómez. López Vicil v. ITT Intermedia, Inc., 143 D.P.R. 574. En virtud de los fundamentos consignados, se desestima la demanda en cuanto a Olga I. Tirado. Se declara CON LUGAR en cuanto a Rafael A. Gómez Pagán y se condena a la parte demandada al pago de $232,436.40 en concepto de indemnización por el discrimen del cual fue víctima en su empleo debido a su edad. Asimismo, la doble penalidad por la pérdida de ingresos pasados y futuros. Además, $40,000 por los daños físicos, morales y las angustias sufridas. Aplica también la doble penalidad a esta partida. Los honorarios de abogado se compensan con un 25% de la cantidad básica y son responsabilidad del patrono cuyo personal gerencial discriminó al obrero causándole daños a su salud física y emocional. Resolvemos con el beneficio de la comparecencia de las partes, la voluminosa transcripción del juicio en su fondo y los autos originales, no sin antes exponer, en lo pertinente, el trasfondo fáctico de lo acaecido. II Gómez Pagán comenzó a trabajar como mecánico industrial de Janssen el 10 de marzo de 1989. En el 1996, alegadamente se desató contra su persona un patrón de discrimen por razón de su edad. El alegado discrimen se manifestó de diferentes maneras, entre éstas, mediante una serie de evaluaciones negativas en el desempeño de su labor. La alegada humillación a la que fue sometido lo llevó a perder el control de sus emociones, llorando constantemente; una vez frente al personal del departamento de recursos humanos de Janssen. Como consecuencia de lo anterior, el 19 de enero de 2000, Gómez Pagán y su esposa presentaron demanda contra Janssen, su supervisor Cándido González, Fulana de Tal y la Sociedad Legal de Gananciales compuesta por éstos, al amparo de los artículos 1802 y 1803 del Código Civil, 31 L.P.R.A. § 5141 y 5142; el Age Discrimination Employment Act of 196T\ 29 U.S.C. § 621; de las disposiciones del Artículo II de la Carta de Derechos de la Constitución del Estado Libre Asociado de Puerto Rico; y, de la Ley Núm. 100 de 30 de junio de 1959, según enmendada, 29 L.P.R.A. § 146-151. Entre otras reclamaciones, solicitaron los daños y perjuicios alegadamente sufridos por ambos. El 1ro. de febrero de 2000, Janssen presentó su contestación a la demanda. Entre sus defensas afirmativas adujo que nunca discriminó contra Gómez Pagán por razón de su edad ni en forma alguna, como tampoco incurrió en persecución y hostigamiento en su contra y que el desempeño de este siempre había sido evaluado objetivamente y de conformidad con las normas y políticas aplicables. Luego de comenzado el descubrimiento de prueba, el 15 de agosto de 2000, Janssen presentó una Moción en Relación a Honorarios Periciales y en Solicitud de Orden Protectora. El 13 de septiembre de 2000, notificada el 15 de septiembre, el TPI emitió una orden protectora fijando los honorarios periciales del Dr. Jaime Del Toro, perito de Gómez Pagán, a razón de trescientos dólares ($300) por hora por su comparecencia a una deposición. Además, dispuso que no se incluia el período de estudio o preparación en el cómputo, así como tampoco el tiempo posterior a la declaración. Posteriormente, el 30 de marzo de 2001, las partes presentaron el Informe Preliminar sobre Conferencia 279Preliminar entre Abogados. El 6 de abril de 2001, se celebró la Conferencia con Antelación al Juicio. Luego de concluir con el descubrimiento de prueba, el TPI señaló la celebración del juicio en su fondo. El juicio se celebró durante los días 20 y 21 de mayo y 20 y 25 de junio de 2002. Testificaron, por parte de Gómez Pagán, además de éste: 1) Faustino Aponte Laboy, su compañero dé trabajo de cincuenta (50) años de edad; 2) Carlos Burgos Rodríguez, otro compañero de trabajo de cincuenta y un (51) años de edad; y 3) el Dr. Jaime Del Toro, su psiquiatra y perito en el caso. Testificaron por parte de Janssen: 1) Laura Virginia Rodríguez Delgado, directora ejecutiva de efectividad organizational para Johnson & Johnson, quien trabajó en Janssen en el área de adiestramiento; 2) Rosie Luján Nieves, “employee relations expert” en Janssen; 3) Luis Guillermo Pérez Molina, director de manufactura y luego gerente de ingeniería y mantenimiento en Janssen; 4) Russell Joseph Casserino, “engineering systems facilitator” en Janssen; 5) Cándido González Martínez, supervisor de mantenimiento hasta diciembre de 2000 y luego ingeniero de empaque final en Janssen; y 6) Femandito Arroyo Ramírez, quien ha ocupado varios puestos en Janssen, tales como mecánico de línea, “group leader”, “packaging engineering specialist” y “packaging engineering facilitator”. Concluido el juicio, el 9 de julio de 2002, notificada el 19 de julio, el TPI dictó Sentencia desestimando la reclamación instada por la co-demandante Olga Iris Tirado; declaró con lugar la demanda de Gómez Pagán y condenó a Janssen al pago de doscientos mil dólares ($200,000) en concepto de indemnización por el discrimen del cual fue víctima Gómez Pagán en su empleo por razón a su edad, más la doble penalidad impuesta por ley. Además, impuso honorarios de abogados en un veinticinco por ciento (25%) de la cantidad básica y por la responsabilidad de Janssen cuyo personal gerencial discriminó a Gómez Pagán causándole daños a su salud física y emocional. El 29 de julio de 2002, Gómez Pagán presentó escrito titulado Moción Solicitando Determinaciones de Hechos con relación a las causas de acción por concepto de lucro cesante y la de daños y perjuicios instada por Olga Iris Tirado. Además, ese mismo día presentó un memorando de costas al amparo de la Regla 44 de las de Procedimiento Civil, 32 L.P.R.A. Ap. III. El 30 de julio de 2002, notificada el 1ro. de agosto, el TPI emitió Resolución declarando No Ha Lugar la solicitud de determinaciones de hechos adicionales solicitada por Gómez Pagán. El 30 de julio de 2002, Gómez Pagán solicitó reconsideración a la sentencia dictada el 19 de julio de 2002, mediante la cual se desestimó su reclamación por concepto de lucro cesante o ingreso dejado de percibir. Además, en cuanto a la desestimación de la causa de acción instada por Olga Iris Tirado. Por su parte, el 5 de agosto de 2002, Janssen presentó escrito titulado Oposición de Memorando de Costas al Amparo de la Regla 44 de las de Procedimiento Civil. Por otro lado, el 9 de agosto de 2002, Janssen presentó una Oposición de Moción en Solicitud de Reconsideración. En esa misma fecha, 9 de agosto del 2000, notificada el 13 de agosto, el TPI emitió una Orden con relación a la Moción de Reconsideración presentada por Gómez Pagán el 30 de julio de 2002, mediante la cual acogió dicha reconsideración. Por otro lado, ordenó a la parte demandada Janssen expresar en diez (10) días “el porque no enmendar la sentencia para incluir $232,436.40 en lugar de los $160,000 que concedió como daños por pérdida de ingresos”. Mediante escrito del 10 de agosto de 2002, de Gómez Pagán, titulado Réplica Oposición a Memorando de Costas, éste se allanó a que se eliminara de su memorando de costas, los gastos de correspondencia y fotocopias como costas del litigio. No obstante, se reafirmó en su derecho a que se le reembolsaran como costas los gastos del perito Dr. Jaime Del Toro. Mediante Resolución emitida el 12 de agosto de 2002, notificada el 13 de agosto, el TPI aprobó costas ascendentes a $9,032, de los cuales $8,859 correspondían a honorarios periciales. Por otro lado, el 15 de agosto de 2002, Janssen, en escrito titulado Moción en Solicitud de Aclaración de Orden, solicitó al TPI le aclarare de donde surgía la suma de $160,000 incluida en su Orden del 9 de agosto, notificada el 13 de agosto y porqué concepto había concedido los $200,000. 280El 23 de agosto de 2002, Janssen presentó una Moción en Cumplimiento de Orden de la orden emitida por el TPI el 9 de agosto de 2002. Solicitó se diera por cumplida lo ordenado el 9 de agosto y se declarare No Ha Lugar la solicitud de reconsideración presentada por Gómez Pagán el 30 de julio de 2002 En esa misma fecha, 23 de agosto, Janssen presentó una Moción en Solicitud de Reconsideración Parcial, en la que solicitó del TPI que reconsiderara parcialmente la Resolución emitida el 12 de agosto de 2002, y en su consecuencia declarara sin lugar la solicitud de Gómez Pagán en cuanto a las costas reclamadas por concepto de gastos de peritaje. Luego de transcurrido el término de diez (10) días de la presentación de la solicitud, se entendió rechazada de plano según las disposiciones de la Regla 47 de las de Procedimiento Civil, 32 L.P.R.A. Áp. III. Por otro lado, el 9 de septiembre de 2002, notificada el 10 de septiembre, el TPI dictó Resolución en Reconsideración y la Sentencia Enmendada en Reconsideración mencionada anteriormente. A continuación transcribimos las determinaciones de hechos incluidas en la referida sentencia: DETERMINACIONES DE HECHOS 1. Rafael A. Gómez Pagán nació en octubre 21 de 1945. Luego de varios años de experiencia en mecánica, comenzó a trabajar en Janssen, Inc. el 10 de abril de 1989. Venía de Squibb Mfg., Inc. donde había desempeñado tareas similares. Se trata de una persona religiosa con una maestría en teología. 2. Janssen Puerto Rico evalúa, periódicamente, a sus empleados. Del resultado de las evaluaciones depende el incremento salarial del personal. A partir de diciembre de 1989, las evaluaciones a Rafael A. Gómez revelan que no necesita mucha supervisión, es cooperador con sus compañeros. Gómez se interesaba por ayudar y aprender nuevos sistemas. Entre 1989 y 1995, sus evaluaciones fueron excelentes. Para ese entonces estaba prestando servicios en el primer tumo. A ese llegaba por antigüedad en la empresa. 3. Para fines de 1995, la empresa querellada sufrió una reestructuración. Bajo ésta se enfatizó en la productividad, eficiencia y la disminución de costos. La filosofía fue expuesta en el tablero de edictos de la planta en un artículo donde se reseñaba que las personas productivas eran los jóvenes. Que a mayor edad, menor rendimiento. El artículo se puso con el fin de que todos lo viesen. Según la gráfica, las personas con mas de cincuenta años de edad no son productivas como empleados. 4. Bajo el nuevo sistema de producción, para el 4 de noviembre de 1995, Rafael A. Gómez recibió 4.4 de un total de 10. Se le decía que debía actuar con más seguridad y tomar riesgos. 5. Los nuevos estilos de la empresa se acentuaron cuando se colocó como supervisor de los mecánicos a Cándido González. A los 31 años de edad supervisaba de dieciocho a veinte mecánicos de Janssen. Los comentarios de González a sus supervisados, mayores que él, eran de que eran obsoletos, no estaban al día, eran viejos. Sus comentarios hirientes no era lo único que hizo con relación a la edad. González comenzó a favorecer a los mecánicos jóvenes asignándoles seminarios para capacitarlos y mejores evaluaciones. Al ser inquirido sobre el particular, decía que las evaluaciones más bajas eran para equiparar el sueldo de los más viejos a los jóvenes. Uniendo la palabra a la acción, se evaluaba a los más viejos con menor puntuación. 6. La conducta de favorecer a los jóvenes “nenes de Cándido”, le llevó a colocar de sublíder a Femandito Arroyo, un joven de veintitantos años, en el primer tumo. La primera evaluación que le hizo a Rafael A. Gómez, la hizo de 2.72 de un total de 10. Fue la primera vez que se determinaba por un supervisor de que Gómez no cumplía con las expectativas de la empresa. A Carlos Burgos, empleado de más de cincuenta años, también le hizo una evaluación de 3.15 que no cumplía con lo esperado. Faustino Aponte fue descendido eventualmente del puesto de mecánico. Su edad era similar a la los de los otros dos citados y las evaluaciones bajas también. Ahora Gómez era conflictivo, resistente al cambio y necesitaba mejorar su técnica. Todo esto según su 281supervisor Cándido González. Para la evaluación de 1998, el señor Gómez anotó que la evaluación era motivada por el discrimen. Pedía que se discutiera en otro foro más objetivo. Janssen no atendió el reclamo. En la de 1999, Rafael A. Gómez volvió a señalar persecución del supervisor cuando recibió 2.5 de promedio. No la firmó y se marchó llorando del lugar adonde se le llamó para discutir la evaluación. 7. El 15 de agosto de 1999, Cándido González le preparó un Plan de Desarrollo a Gómez. Estos se hacen con los empleados que queden por debajo de las expectativas de la compañía. Como punto final el empleado tenía que firmar lo siguiente: “Entiendo que los puntos traídos anteriormente no son discriminatorios ni de hostigamiento contra mi persona Están relacionados con mi ejecutoria de trabajo y mi necesidad de mejorarlos” Rafael Gómez rehusó firmar. No obstante, estaba de acuerdo con recibir adiestramiento. Es necesario apuntar que en estos últimos la predilección de González era dar mejores oportunidades a los jóvenes mecánicos. Que a los mayores se les daban, generalmente, aquellos compulsorios a tenor con las reglamentaciones de la industria. A los mayores no se les entrenaba en los equipos y líneas nuevas. 8. La conducta del supervisor de los mecánicos del primer tumo motivó reuniones de éstos con la gerencia. Con los mecánicos del segundo tumo, el trato era considerado, se aceptaban sus ideas, era amable. En cambio, con los del primero era autoritario, se desmerecía la labor y no se aceptaba el trabajo. La antigüedad la tenían los del primero y más edad. Esto y los problemas salariales concomitantes hicieron necesaria la reunión. En ésta participó un joven de nombre John Figueroa quien era extrovertido, ofrecía sus opiniones. También tuvo problemas con la compañía e incluso tenía una reclamación judicial contra ésta. Como resultado de la reunión con la directora de personal, ésta llamó a Cándido González para que mejorase su estilo con relación a los supervisados. 9. Rafael A. Gómez llevó a la atención de los directivos de personal el hostigamiento por edad que tenía González contra él. Nunca se hizo un informe sobre el planteamiento del empleado. Aparte de recordarle a González que la política de la empresa era la de no-discrimen, no se hizo más. Con ello se despacho la queja de Gómez sin ulterior gestión y ni siquiera informarle el resultado de la investigación que él había pedido. 10. Rafael A. Gómez tenía a su cargo la reparación y mantenimiento de las líneas más antiguas de la compañía. Las máquinas, en consecuencia, eran más propensas a romperse. Desde que llegó Cándido González, las piezas tardaban más en llegar a manos del mecánico. La presión del supervisor aumentaba en cuanto al trabajo de Gómez. Las acciones de González comenzaron a afectar la salud de Gómez. Además, de los comentarios acerca de la edad y la obsolescencia de Rafael A. Gómez sobre éste se cernía el desempleo, puesto que un Plan de Desarrollo no cumplido a juicio del supervisor podía acarrear el despido. Gómez apenas podía dormir a causa de las preocupaciones en el trabajo. El trato arrogante y de menosprecio por el esfuerzo en mantener funcionando las máquinas dejó huellas en la salud del supervisado en su mente y físico. Empezó a tener presión arterial de sobre 150/90. La queja sobre el trato discriminatorio se tradujo en un empeoramiento del supervisor hacia él. Rafael Gómez temía tener que acudir al trabajo cada día. De noche se encerraba en sí mismo, pensando sobre su situación. No podía renunciar al trabajo por los compromisos económicos. Pero finalmente, tuvo que dejar el trabajo donde recibía $14.07 la hora por un seguro social de $1,114.00 al mes. A los cincuenta y cuatro años debió retirarse por su incapacidad laboral. Su esposa tiene que dedicarse a llevarlo a las citas médicas, ya que toma medicamentos recetados por los médicos que le atienden para sus padecimientos mentales, neurológicos y cardiovasculares. Ella dejó su empleo dos años después que su esposo para cuidarle. 11. Desde 1996, Rafael A. Gómez se deprimió emocionalmente. Las tensiones laborales, además, le llevaron a desarrollar una enfermedad hipertensiva no controlada con medicamentos. La depresión y la ansiedad se fueron desarrollando gradualmente. Pero la hipertensión le causó un derrame cerebral el 3 de diciembre de 1998. Al regreso al trabajo, luego de la recuperación, recibió peor trato del supervisor. A raíz del proceso evaluativo de 2821999 sufrió un segundo infarto cerebral en noviembre de 1999. Tuvo que buscar ayuda psiquiátrica en noviembre de 1999. El psiquiatra que lo atendió creyó detectar la enfermedad de “Parkinson” en el señor Gómez. Las pruebas clínicas corroboraron la impresión diagnóstica inicial. Después de que dejó el empleo, la condición emocional mejoró un tanto hasta que en una deposición en este pleito se le agravó a consecuencia del trato recibido, ajuicio del psiquiatra. 12. Para el Dr. Jaime Del Toro, la tensión emocional llevó a la hipertensión, ésta a los infartos cerebrales y las lesiones que dejaron le causaron el mal de “Parkinson". La presión diastólica de 130 o más le llevó a la lesión cerebral en dos puntos de la sustancia blanca. Con la muerte de las neuronas y la alteración a los circuitos, se le causó daño al hipotálamo y a la sustancia nigra. De ahí, el “Parkinson” que desarrolló el querellante. 13. Después de lo ocurrido con Rafael A. Gómez, el trato de Cándido González hacia los empleados mayores de edad cambió. El supervisor pidió excusas a Carlos Burgos, uno de los afectados, y en general, mostró más consideración hacia estos grupos. 14. El señor Rafael A. Gómez trabajaba regularmente cuarenta horas a la semana. El salario anual era de $29,266.00 en su posición con la empresa demandada. 15. Rafael A. Gómez pudo haberse jubilado con plenos beneficios a los 62 años de Janssen Ortho-LLC. No pudo lograr su propósito debido a las enfermedades que le causó la conducta de la parte demandada. Inconforme, en diferentes aspectos tanto con la Resolución imponiendo costas como de la Sentencia Enmendada en Reconsideración Janssen (KLCE-02-00952 y KLAN-02-1072); y Gómez Pagán (KLAN-02-01070), acuden ante este foro mediante los tres recursos mencionados y alegan que: KLCE-2002-00952 (Janssen): 1. Erró el TPI al determinar que procedía la imposición de costas por concepto de peritaje, sin haber sido dicha partida plenamente justificada por la parte demandante. 2. Erró el TPI al conceder una partida excesiva de costas por concepto de peritaje. KLAN-2002-01070 (Gómez Pagán): 1. Incidió el TPI al valorizar los daños físicos, morales y las angustias mentales sufridas por el demandante Rafael A. Gómez Pagán en la suma de cuarenta mil dólares ($40,000). Dicha suma es tan irrazonablemente baja que justifica la intervención del tribunal para aumentarla. KLAN-2002-01072 (Janssen): 1. El TPI erró al realizar un uso inadecuado de un proyecto de sentencia. 2. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que a partir de diciembre de 1989, las evaluaciones a Rafael A. Gómez revelan que no necesitaba mucha supervisión, es cooperador con sus compañeros. Gómez se interesaba por ayudar y aprender nuevos sistemas. Entre 1989 y 1995, sus evaluaciones fueron excelentes. 3. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que la filosofía de Janssen fue expuesta en el tablero de edictos de la planta en un artículo donde se reseñaba que las personas productivas eran las jóvenes, que a mayor edad, menos rendimiento, que el artículo se puso con el fin de que todos lo viesen, y que 283según la gráfica, las personas con más de cincuenta años de edad no son productivas como empleados. 4. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que los comentarios de Cándido González a sus supervisados, mayores que él, se dirigían a que eran obsoletos, no estaban al día y eran viejos. 5. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que Cándido González comenzó a favorecer a los mecánicos jóvenes asignándoles seminarios para capacitarlos y mejores evaluaciones, mientras que a los mayores no se les entrenaba en los equipos y las líneas nuevas. 6. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que Cándido González evaluaba a los empleados más viejos con menor puntuación. 7. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que la conducta de favorecer a los jóvenes “Nenes de Cándido”, le llevó a colocar en calidad de sub-líder a Femandito Arroyo, un joven de veintitantos años de edad. 8. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que a Carlos Burgos, empleado de más de cincuenta años, Cándido González también le hizo una evaluación de 3.15 que no cumplía con lo esperado. 9. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que Faustino Aponte fue descendido eventualmente del puesto de mecánico. 10. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que aparte de recordarle a Cándido González que la política de la empresa era de no discriminar, no se hizo más. 11. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que con los mecánicos del segundo tumo el trato de Cándido González era considerado, se aceptaban sus ideas, era amable. 12. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que para el Dr. Jaime del Toro la tensión emocional llevó a la hipertensión, ésta a los infartos cerebrales y las lesiones que dejaron le causaron el mal de “Parkinson”. 13. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que después de dejar el empleo, la condición emocional mejoró un tanto hasta que en una deposición en este pleito se le agravó a consecuencia del trato recibido, ajuicio del psiquiatra. 14. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que la hipertensión le causó a Rafael A. Gómez Pagán un derrame cerebral el 3 de diciembre de 1998. A raíz del proceso evaluativo del 1999, sufrió un segundo infarto cerebral en noviembre de 1999. 15. El TPI incurrió en error manifiesto en la apreciación de la prueba al concluir que Janssen discriminó en contra del co-demandante Rafael A. Gómez Pagán por razón de edad. 16. Erró el TPI al concederle al co-demandante Rafael A. Gómez Pagán daños y perjuicios en la cantidad de $40,000, además de la doble penalidad de ley. 17. Erró el TPI al conceder una partida de lucro cesante por concepto de la incapacidad laboral sin que se hubiese probado que la incapacidad fue producto del alegado discrimen laboral. 28418. Erró el TPI al otorgar una partida de lucro cesante por resultar la misma irrazonable en vista de la concesión de la concesión de daños otorgada. 19. Erró el TPI al conceder una partida de lucro cesante ascendente a $232,463.40 sin descontar las cantidades recibidas por el cO-demandante Gómez como beneficios de los planes de incapacidad a corto y largo plazo de Janssen, así como los beneficios recibidos por la Administración del Seguro Social. III Comenzaremos considerando los errores que se circunscriben a la apreciación de la prueba. Como regla general y ante la ausencia de otras herramientas para evaluar si el TPI erró en su apreciación de la prueba, tenemos que amparamos en la doctrina ampliamente establecida sobre la deferencia judicial en la etapa apelativa a la apreciación de la pmeba oral que hizo el juzgador de instancia. La norma jurídica reconocida en nuestro sistema de derecho procesal establece que la apreciación de la pmeba realizada por el tribunal sentenciador y la credibilidad que dicho foro otorgue a la pmeba, debe ser objeto de gran deferencia por los tribunales apelativos, los cuales, en ausencia de circunstancias extraordinarias o que demuestren que el tribunal apelado actuó movido por la pasión, el prejuicio, la parcialidad, o error manifiesto, no deben intervenir con las determinaciones de hechos de este último. Municipio de Ponce v. Autoridad de Carreteras y Transportación, Op. de 29 de diciembre de 2000, 2001 J.T.S. 3, a la pág. 658; Trinidad García v. Chade, Op. de 18 de enero de 2001, 2001 J.T.S. 10, a la pág. 793; Colón González v. K-Mart, Op. de 26 de junio de 2001, 2001 J.T.S. 98, a la pág. 1484; Monllor Arzola v. Soc. Legal de Gananciales, 138 D.P.R. 600 (1995); Pérez Cruz v. Hosp. La Concepción, 115 D.P.R. 721 (1984). Más aún, dispone la Regla 43.2 de las de Procedimiento Civil de Puerto Rico, 32 L.P.R.A., Ap. Ill, R. 43.2, en lo pertinente, que “[l]as determinaciones de hechos basadas en testimonio oral no se dejarán sin efecto a menos que sean claramente erróneas, y se dará la debida consideración a la oportunidad que tuvo el Tribunal Sentenciador para juzgar la credibilidad de los testigos”. A la luz de la normativa esbozada y de las circunstancias del caso, tenemos que concluir que, en ausencia de error manifiesto, pasión, prejuicio o parcialidad al apreciar la pmeba, es menester no intervenir con las determinaciones de hechos, la apreciación de la pmeba y la adjudicación de credibilidad efectuada por el juzgador del testimonio de las partes y demás testigos. Ahora bien, esta norma de deferencia judicial no es aplicable a la evaluación de pmeba documental o pericial debido a que, en estos casos, los tribunales apelativos están en las mismas condiciones que el tribunal de instancia. Por tal razón, los tribunales apelativos pueden adoptar su propio criterio en cuanto al valor probatorio de ese tipo de evidencia. Dye-Tex P.R., Inc. v. Royal Ins. Co., P.R., 150 D.P.R. 658, 662 (2000); Culebra Enterprises Corp. v. E.L.A., 143 D.P.R. 935 (1997). Es norma reiterada que la apreciación de la pmeba efectuada por los tribunales sentenciadores gozará de gran respeto y deferencia. Fundamento de ello es el hecho de que dichos foros son quienes tienen la oportunidad de ver y observar a los testigos mientras deponen, sus gestos, dudas y contradicciones. Al apreciar la pmeba ante su consideración, los tribunales apelativos no habrán de pasar juicio sobre la credibilidad de los testimonios ofrecidos ante el foro de instancia y sustituirlo por el criterio propio. Ello es así, porque el tribunal de instancia es el foro ante el cual declararon los testigos y el cual tuvo la oportunidad de apreciar el comportamiento, evaluar la veracidad del testimonio y dirimir cualquier conflicto que surgiera en el proceso. Pueblo v. Dávila Delgado, 143 D.P.R. 157 (1997); Pueblo v. Chévere Heredia, 139 D.P.R. 1 (1995); Pueblo v. Rodríguez Román, 128 D.P.R. 121 (1991. En consecuencia, es un principio cardinal que los foros apelativos no intervendrán con las determinaciones efectuadas por los magistrados de instancia a menos que en las mismas exista error manifiesto o que éstos hayan 285actuado movidos por prejuicio, parcialidad o pasión. Monllor v. Soc. de Gananciales, 138 D.P.R. 600 (1995); Pueblo v. Lorio Ormsby I, 137 D.P.R. 722 (1994). Claro está, la norma antes expuesta no implica que los juzgadores de instancia sean inmunes a cometer errores ni que tales determinaciones sean inmutables. El arbitrio del juzgador, aunque respetable y merecedor de deferencia, no es absoluto. La apreciación errónea de la prueba no tiene credenciales de inmunidad frente a la función revisora de un tribunal apelativo. En dicha función revisora, el tribunal apelativo, por vía de excepción, puede descartar las determinaciones de hechos del Tribunal de Primera Instancia cuando éstas no representan el balance más racional, justiciero y jurídico de la totalidad de la pmeba que desfiló ante dicho tribunal. Véanse, Méndez v. Morales, 142 D.P.R. 26, (1996); Rivera Pérez v. Cruz Corchado, 119 D.P.R. 8, 14 (1987); Ramos Acosta v. Caparra Dairy, Inc., 113 D.P.R. 357, 365 (1982). Janssen alega que erró el TPI al determinar que a partir de diciembre de 1989, las evaluaciones a Rafael A. Gómez revelan que no necesitaba mucha supervisión, es cooperador con sus compañeros; que Gómez se interesaba por ayudar y aprender nuevos sistemas; y, que entre 1989 y 1995, sus evaluaciones fueron excelentes. A continuación hacemos un resumen de las evaluaciones incluidas como exhibits en los autos originales. Las primeras evaluaciones fluctuaban de una puntuación de cero (0) a cien (100): “1. En la evaluación de abril a diciembre de 1989, obtuvo una puntuación de 82 que equivale a una calificación de sobre promedio; Gómez Pagán firmó la evaluación. 2. En la evaluación de enero a diciembre de 1990, obtuvo una puntuación de 88 que equivale a una calificación de sobre promedio; Gómez Pagán firmó la evaluación. 3. En la evaluación de enero a diciembre de 1991, obtuvo una puntuación de 90 que equivale a una calificación de excelente; Gómez Pagán firmó la evaluación. 4. En la evaluación de enero a diciembre de 1992, obtuvo una puntuación de 94 que equivale a una calificación de excelente; Gómez Pagán firmó la evaluación. 5. En la evaluación de enero a diciembre de 1993, obtuvo una puntuación de 96 que equivale a una calificación de excelente; Gómez Pagán firmó la evaluación. ” Luego de un cambio en el formato de las evaluaciones, los parámetros fueron unos diferentes y las puntuaciones fluctuaban de cero (0) a diez (10); Gómez Pagán obtuvo las siguientes evaluaciones: “1. En la evaluación de noviembre de 1995, obtuvo una puntuación de 4.4 que equivale a una calificación de que cumple con las expectativas y culmina con una nota que indica que “[d]ebe actuar con más seguridad y tener más confianza en sí mismo. Debe tomar riesgos luego de haber hecho un análisis adecuado del problema o situación ”. Gómez Pagán firmó esta evaluación. 2. En la evaluación de noviembre de 1996, obtuvo una puntuación de 2.72 que equivale a una calificación de que no cumple con las expectativas. Tiene una nota firmada por su supervisor, el Sr. González, que indica que: “Rafael necesita manejar adecuadamente el cambio. Se muestra hostil & resistente al cambio. Necesita mejorar sus técnicas de trabajo en equipo. Crea conflictos con sus compañeros mecánicos y operadores. Se desarrolló Plan de Desarrollo en el que debe trabajar inmediatamente”. Gómez Pagán firmó esta evaluación. ” El 2 de enero de 1997, se estableció un plan de desarrollo para Gómez Pagán. Luego de reestructurar nuevamente el sistema de evaluaciones, las puntuaciones fluctuaban de uno (1) a cinco (5). Gómez Pagán obtuvo 286las siguientes evaluaciones: 1. En la evaluación de enero a junio de 1997, obtuvo una puntuación de 3.25 que equivale a una calificación de competente. Contiene notas que indican que reaccionó de forma positiva al período probatorio, demostró gran mejoría y es un recurso importante para el departamento. Gómez Pagán firmó esta evaluación. 2. En la evaluación de enero a diciembre de 1997, obtuvo una puntuación de 3.45 que equivale a una calificación de que cumple con las expectativas. El Sr. Gonzalez manifiesta que Rafael sigue desarrollándose en diferentes áreas. Adicional al equipo que ya conoce, aprendió CP-5 (quicksolv) y la nueva línea de Harro Hofliger. Necesita asumir más liderato dentro de la línea de Harro. Ayuda a otros mecánicos cuando lo necesitan”. 3. En la evaluación de enero a junio de 1998, obtuvo una puntuación de 2.8 que equivale a una calificación de competente. Gómez Pagán incluyó una nota donde indica “[n]o estoy de acuerdo con esta evaluación, ya que entiendo no se hizo objetivamente. Para mi entender, hay una persecución personal y desearía reunirme a dialogar sobre la misma ante otros foros que puedan ser más razonables y justos. Esta es la segunda ocasión que a mise me evalúa discriminatoriamente. Espero respuesta y cooperación al respecto. 09-04-98”. A su vez, el Sr. González añade una nota que dice: ‘‘[njecesita hacer mejor uso de su tiempo. Necesita ser más proactivo en resolver los problemas de su línea asignada ”. 4. En la evaluación de julio a diciembre de 1998, obtuvo una puntuación de 2.45 que equivale a una calificación de necesitar mejoramiento. El Sr. González indica que “[njecesita mejorar en sus funciones primarias como mecánico, necesita mejorar en resolver problemas en las máquinas y trabajo en equipo con sus compañeros . El gerente, Pérez Molina, señala “[a] Rafael A. Gómez se le han dado oportunidades de proveer apoyo a varias líneas de Blisters en CP-5 HUD y Quicksolv además de la Uhlmann. Últimamente ha confrontado dificultad en lograr la óptima eficiencia de estos para cumplir con nuestro itinerario de trabajo; necesita enfocarse un poco más y utilizar sus conocimientos y destrezas más efectivamente, incluyendo la comunicación ”. 5. En la evaluación de enero a junio de 1999, obtuvo una puntuación de 2.5 que equivale a una calificación de por debajo de las expectativas. Gómez Pagán se negó a firmar esta evaluación y manifestó: “[njo estoy de acuerdo con esta evaluación y entiendo nuevamente que se está discriminando con mi persona y a la misma vez hay hostigamiento y persecución. Espero se tome en consideración mi comentario y nos podamos reunir en otro foro. 07-22-99”. El Sr. González expone que “[njecesita mejorar en la iniciativa. Cuando no hay trabajo en su línea, debe buscar otras áreas donde aprender y mejorar. ” Además, en papel aparte señala que: “[djurante la discusión de la evaluación, Rafael se mostró molesto y hostil en trabajar en las áreas donde necesita mejoramiento. Al momento de retirarse, se negó a firmar su evaluación y se levantó y abandonó la oficina. Inmediatamente retornó y me dijo “Recuerda que las vueltas del mundo son grandes, y se retiro . 6 En la evaluación de julio a diciembre de 1999, obtuvo una puntuación de 1.68 que equivale a una calificación de por debajo de las expectativas. El Sr. González indica que “Rafael necesita mejorar en la resolución de problemas más rápido. Necesita desarrollarse en los aspectos técnicos del área. Necesita cambiar su forma de trabajar a una más proactiva y menos defensiva. Durante el período de discusión de la evaluación, Rafael se encuentra en STD (Plan de Incapacidad de Corta Duración); por está razón no se pudo discutir la evaluación”. 7. Durante el período de evaluación de enero a junio de 2000, Gómez Pagán se encontraba en LTD (Plan de 287Incapacidad de Larga Duración). El 18 de agosto de 1999, se estableció otro plan de desarrollo para el Sr. Gómez Pagán. Luego de examinar las evaluaciones encontramos que el TPI entendió correctamente las evaluaciones al concluir que las primeras evaluaciones hasta el 1995 eran superiores a las evaluaciones que se realizaron posteriormente. También se alega que erró el TPI al determinar que la filosofía de Janssen fue expuesta en el tablero de edictos de la planta en un artículo donde se reseñaba que las personas productivas eran las jóvenes, que a mayor edad, menos rendimiento, que el artículo se puso con el fin de que todos lo viesen, y que según la gráfica, las personas con más de cincuenta años de edad no son productivas como empleados. El TPI le dio entera credibilidad a los testimonios de Gómez Pagán y del Sr. Carlos Burgos, al concluir que: 1) el artículo se colocó en el tablón de edictos al que sólo tenía acceso la secretaría del departamento; 2) el contenido del mismo era sobre la productividad de los empleados según la edad; y 3) éste señalaba que a mayor edad, menor la productividad. No intervendremos con esta determinación del TPI. Por otro lado, comparando los testimonios de los empleados de mayor edad con los más jóvenes simultáneamente a los comentarios de Cándido González a sus supervisados, mayores que él, diciéndoles que eran obsoletos, no estaban al día y eran viejos; y que, contrariamente, a los mecánicos del segundo tumo los trataba de manera considerado, aceptaba sus ideas y era amable, tenemos que concluir al igual que concluyó el TPI, que tanto a Gómez Pagán como a Burgos, el Sr. González les hizo comentarios despectivos acerca de su edad. Por el contrario, trataba muy bien a los más jóvenes, entre ellos, Arroyo Ramírez, quien testificó sobre lo bien que lo trataba el Sr. González, aunque era fuerte y exigía mucho. Además, Janssen alega que se equivocó el TPI al determinar que Cándido González comenzó a favorecer a los mecánicos jóvenes asignándoles seminarios para capacitarlos y mejores evaluaciones, mientras que a los mayores no se les entrenaba en los equipos y las líneas nuevas. Se presentaron como exhibits el listado de seminarios tomados por Gómez Pagán y sus evaluaciones. Además, el mismo Gómez Pagán testificó sobre la diferencia en comparación con los empleados más jóvenes. También Carlos Burgos testificó sobre las evaluaciones que consideró injustas y poco objetivas por razón de su edad. Pero nunca se presentaron evaluaciones o listados de seminarios para alguno de esos empleados más jóvenes, por lo que sólo podemos concluir que el TPI entendió que el testimonio de Gómez Pagán merecía entera credibilidad. Enumerado como otro error, Janssen alega que desacertó el TPI al determinar simplemente que Faustino Aponte fue descendido eventualmente del puesto de mecánico. Del testimonio del Sr. Aponte se desprende que primero fue descendido y luego ascendido, por lo que obtuvo un aumento salarial. El indica que Janssen le dio la oportunidad de ascender profesionalmente. En este punto, erró el TPI. Por otro parte, de la prueba presentada se desprende como correctamente concluyó el TPI que además de realizar tres reuniones para discutir la situación, Janssen no realizó ningún acto afirmativo encaminado a investigar las alegaciones de Gómez Pagán y resolver el problema de discrimen. Esto aun cuando la política de la empresa era una en contra del discrimen. En el presente recurso, Janssen no aduce razones o hechos que denoten pasión, prejuicio, parcialidad o error manifiesto en la apreciación de la prueba por parte del TPI. Ante tal situación y en ausencia de circunstancias extraordinarias, no intervendremos con la apreciación general efectuada por el TPI. El TPI celebró cuatro (4) días de vistas en los cuales evaluó abundante prueba documental, testifical y pericial. Tuvo ante sí los testigos, evaluó sus comportamientos al testificar, adjudicó la credibilidad que les merecían y evaluó un sinnúmero de exhibits. En consideración a lo cual, determinó que Janssen discriminó contra Gómez Pagán por razón de su edad. No estamos en posición de concluir de una manera diferente. 288Luego de haber determinado que Gómez Pagán fue discriminado por Janssen, entraremos a evaluar los daños ocasionados a éste por el discrimen. Como mencionáramos anteriormente, es norma reiterada que los tribunales tienen amplia discreción en la apreciación de la prueba pericial, pudiendo adoptar su propio criterio en la apreciación o evaluación de la misma y hasta descartarla, aunque resulte técnicamente correcta. Dye-Tex P.R., Inc., 150 D.P.R. a la pág. 662; Prieto v. Maryland Casualty Co., 98 D.P.R. 594, 623 (1970). En lo referente a la evaluación y apreciación de la prueba médica pericial, este Tribunal está en la misma posición que los tribunales de primera instancia. Rodríguez Cancel v. A.E.E., 116 D.P.R. 443, 450 (1985). El TPI le dio entera credibilidad al testimonio pericial del Dr. Jaime Del Toro y concluyó que: 1) la tensión emocional llevó a la hipertensión, ésta a los infartos cerebrales y las lesiones que dejaron le causaron el mal de “Parkinson”; 2) después de dejar el empleo, la condición emocional mejoró un tanto hasta que en una deposición en este pleito se le agravó a consecuencia del trato recibido; y 3) la hipertensión le causo a Rafael A. Gómez Pagán un derrame cerebral el 3 de diciembre de 1998 y a raíz del proceso evaluativo del 1999, sufrió un segundo infarto cerebral en noviembre de 1999. En el Informe de Evaluación Psiquiátrica presentado por el Dr. Jaime Del Toro, se resume el historial médico de Gómez Pagán de la siguiente manera: “El señor Rafael Gómez padece de hipertensión arterial, al presente refractaria, padece de hernia hiatal, padece de válvula tricúspide y esclerosis aórtica con válvula mitral atrofiada. Ha tenido dos derrames cerebrales uno en diciembre 3 del 1998 y otro en noviembre del 1999, padece de síndrome Pakinsoniano [sic] desde diciembre del 1999, tiene un padecimiento de espasmos musculares cervicales y radiculopatía C3-C4 y radiculopatía L3-L4, con una lesión periférica y central lumbosacral con lesiones en vías ascendentes somatosensoriales. No padece de alergias o enfermedades crónicas infecciosas. No hay historial de abuso de substancias, no hay historial de alcoholismo o drogadiccion, no hay historial de problemas con las tiroides, ni diabetes mellitus. ” El Dr. Del Toro diagnosticó a Gómez Pagán con una Depresión Mayor Recurrente con Ansiedad Severa. El diagnóstico psiquiátrico surge de la evaluación directa de Gómez Pagán, por lo que no hay duda de que el discrimen fue el factor determinante en la condición de depresión. Por otro lado, las conclusiones sobre la relación causal de las demás condiciones con el discrimen no es tan clara. Al comparar el testimonio del Dr. Del Toro con su informe pericial, surgen ciertas dudas; por ejemplo las referencias a dos derrames cerebrales cuando realmente fueron dos ataques isquémicos cerebrales transitorios leves. De su testimonio se desprende que prácticamente todas las conclusiones referentes a las condiciones no psiquiátricas estaban basadas en la información provista por el mismo Gómez Pagan. Además, indico que la condición de hipertensión comenzó aproximadamente para el año 1989, cinco (5) años antes de que comenzara el discrimen. No se probo una cadena real entre el discrimen y las condiciones cardio y neurológicas de Gómez Pagán. Por lo tanto, no podemos concluir, según la prueba vertida, que la incapacidad total para trabajar de Gómez Pagán fue ocasionada por el discrimen debido a su edad. Por otro lado, analizamos si la cantidad de cuarenta mil dólares ($40,000) concedida por daños y perjuicios a Gómez Pagán es irrazonable. La estimación de los daños es una función que descansa en la sana discreción del juzgador. Toro Mercado v. P.R. & Amer. Ins. Co., 87 D.P.R. 658, 659 (1963). De ordinario, un tribunal apelativo respetará la valoración de los daños que haga un tribunal de primera instancia, por dicho foro estar en mejor posición para evaluar sus elementos visibles e intangibles. De ahí, la norma de que un tribunal apelativo sólo intervendrá con las cuantías concedidas en casos en que sean exageradamente altas o ridiculamente bajas. Quiñones López v. Manzano Pozas, 141 D.P.R. 139 (1996); Torres Solís v. A.E.E., 136 D.P.R. 302, 312 (1994). Por otro lado, nuestro Tribunal Supremo ha destacado el sentido remediador y no punitivo que encama el Art. 1802 del Código Civil, 31 L.P.R.A. § 5141. Vda. de Valentín v. E.L.A., 84 D.P.R. 112, 123 (1961). 289La gestión judicial de estimación y valoración de daños es particularmente difícil; no existe un sistema mecánico que permita llegar a un resultado exacto en relación con el cual se pueda asegurar que todas las partes queden satisfechas y complacidas. De ordinario, los tribunales de primera instancia están en una mejor posición que los tribunales apelativos para evaluar la cuantía de los daños, ya que éstos son los que tienen contacto directo con la prueba que presenta la parte que los reclama. Por esta razón, existe una norma de abstención judicial que dispone que no debe intervenirse con las determinaciones de daños hechas por los tribunales de primera instancia a menos que las cuantías concedidas sean "ridiculamente bajas o exageradamente altas”. Vélez Rodríguez v. Amaro Cora, 138 D.P.R. 182 (1995); Rodríguez Cancel v. A.E.E., 116 D.P.R. 443, 451 (1985); Urrutia v. A.A.A., 103 D.P.R. 643 (1975); Valdejuli Rodríguez v. A.A.A., 99 D.P.R. 917 (1971). La parte que solicita la modificación de las sumas concedidas por un tribunal de primera instancia en concepto de daños, tiene que demostrarle al tribunal apelativo la existencia de circunstancias especiales que así lo requieren. Canales Velázquez v. Rosario Quiles, 107 D.P.R. 757 (1978). Luego de examinar la prueba pericial en el caso de autos, consistente del informe pericial y del testimonio del perito, Dr. Del Toro Soto, así como el testimonio de los testigos, consideramos que la cuantía debe ser modificada. Gómez Pagán padece de depresión debido al discrimen al que fue sujeto por un período de alrededor de cuatro (4) años; que, entre otras cosas, incluyó bajas evaluaciones de trabajo y comentarios despectivos con respecto a su edad. Por esta razón, aumentamos la cuantía concedida a sesenta mil dólares ($60,000). Janssen también ataca la partida concedida por lucro cesante tanto en su concesión como en la cuantía. Para dilucidar este planteamiento, debemos guiamos por la doctrina establecida por nuestro Tribunal Supremo respecto a la compensación por lucro cesante al amparo de la Ley Núm. 100 de 30 de junio de 1959, 29 L.P.R. A. § 146-151; Artículo 18 del Código Civil de Puerto Rico, 31 L.P.R.A. §18. La compensación que se concede al amparo de la Ley Núm. 100 incluye, entre otras, la pérdida económica según los ingresos y beneficios que un demandante deja de percibir desde la fecha del despido hasta la fecha de la sentencia. El lucro cesante se ha calificado como "ingresos dejados de percibir". En ese sentido, una reclamación referente a ingresos dejados de percibir está incluida en el lucro cesante. Esa compensación por ingresos dejados de percibir tiene el mismo carácter de ganancialidad que se le atribuye al lucro cesante. Siendo los salarios un elemento esencial de la relación obrero-patronal, se ha establecido que el lucro cesante está claramente incluido entre los daños compensables bajo la Ley Núm. 100. Maldonado v. Banco Central Corp., 138 D.P.R. 268, 272-273 (1995). Al instar una acción bajo la Ley Núm. 100, un empleado casado implícitamente reclama en representación de su sociedad de gananciales las partidas que le correspondan a ésta. La imposición doble de dicha compensación que establece la ley, no desnaturaliza el carácter ganancial del lucro cesante. Maldonado, 138 D.P.R. a las págs. 273-274. La referida compensación se concede desde la fecha del despido hasta la fecha de la sentencia. Maldonado, 138 D.P.R. a la pág. 272. Habiéndose determinado que Gómez Pagán fue objeto de un despido constructivo por el discrimen, el TPI tiene que calcular la compensación por pérdida económica según los ingresos y beneficios desde el último día que éste trabajó hasta la fecha en que se dictó la sentencia. No se encontró nexo causal entre el discrimen y la condición de “Parkinson”, por lo que se revoca la compensación por lucro cesante hasta la fecha de su retiro de no padecer la condición. La compensación se calculará desde el último día que trabajó hasta el día que se dictó la Sentencia. Debemos también examinar la doctrina denominada “fuente colateral que, según Gómez Pagán, es aplicable al caso de autos. En nuestra jurisdicción está vigente la doctrina de la fuente colateral y la misma, como regla general, impide al causante de un daño, deducir del importe de la indemnización de la cual responde, la compensación o beneficios que haya recibido el perjudicado de una tercera persona o entidad, no relacionada 290con el demandando. El demandante tiene derecho a todos los gastos específicos que correspondan aunque: (1) los servicios le hayan sido rendidos gratuitamente; o (2) los gastos le hayan sido pagados por otros; o (3) como una liberalidad, su patrono u otra persona le haya pagado sus salarios; o (4) estos gastos están cubiertos por pólizas de seguros, siempre que no se trate de un seguro de cosas, pues en ésta no se admite generalmente la acumulación de beneficios. Futurama Import Corp v. Trans Caribbean, 104 D.P.R. 609, 611-612 (1976), Carlos J. Irizarry Yunqué, Responsabilidad Civil Extracontractual: Un Estudio Basado en las Decisiones del Tribunal Supremo de Puerto Rico 475 (Facultad de Derecho de la Universidad Interamericana de Puerto Rico, San Juan 1995). Sin embargo, el valor o interés social de una norma jurídica sobre daños, está subordinada al principio rector de hacer justicia independientemente de su origen. La utilidad de la doctrina que nos ocupa, no puede circunscribirse en términos exclusivos de castigar al causante del daño o de premiar al perjudicado y tampoco puede basarse en una premisa de costo. Futurama Import Corp., 104 D.P.R. a las págs. 612-613. Ante la alternativa de aplicar mecánicamente la doctrina o rechazarla en su totalidad, lo más razonable es identificar en cada caso sus circunstancias peculiares, y de acuerdo a la naturaleza del daño sufrido y del examen del origen y propósito o razón de ser del beneficio colateral de que se trate, determinar la improcedencia o la justificación de la acumulación de compensaciones. Esta posición toma en cuenta las diversas clases de fuentes de beneficios colaterales y las diferencias entre las mismas. Es incorrecto analizar el ámbito o frontera de la regla en el contexto de lograr una regla sencilla aplicable. A los fines de decidir la aplicabilidad o no de la doctrina en el campo de seguro, es necesario establecer una distinción entre seguro de cosas y los seguros sobre la vida o contra accidentes susceptibles de ocunirle a las personas. Futurama Import Corp., 104 D.P.R. a la pág. 614; Canales v. Pan American, 112 D.P.R. 329, 343 (1982). En Futurama Import Corp., 104 D.P.R. a las págs. 611-612, nuestro Tribunal Supremo expuso de la siguiente manera la doctrina de la fuente colateral: “Reiteramos la vigencia en nuestra jurisdicción de dicha doctrina, que como regla general impide al causante de un daño deducir del importe de la indemnización de la cual responde, la compensación o beneficios que haya recibido el perjudicado de una tercera persona o entidad, esto es, de una fuente no relacionada con el demandado, denominada "collateral source rule". Constituye la norma que aplicáramos en los casos de Goose v. Hilton Hotels, 79 D.P.R. 523 (1956); Pereira v. Commercial Transport Co., 70 D.P.R. 641 (1949), y Reyes v. Aponte, 60 D.P.R. 890 (1942), en que sostuvimos el derecho de una parte a reclamar unos salarios por lucro cesante, no empece habérselos pagado su patrono, por estimar que se trataban de unas donaciones que no podían beneficiar al demandado. El pago de salarios durante vacaciones o enfermedad del empleado se reconoce por razones distintas a las que dan lugar a una compensación por negligencia. Los salarios se originan en un contrato de trabajo, y en caso de ausencia por accidente hasta podrían tener carácter de bonificación o donación a un buen empleado para beneficio de su familia que depende de ese ingreso; no es una compensación propiamente dicha. Un análisis^ de la abundante literatura sobre esta doctrina, demuestra que la misma descansa sobre fundamentos racionales y lógicos, que si bien a veces resultan complejos, no necesariamente anulan su eficacia y la variedad de beneficios en que es susceptible de ser correctamente aplicada. ” Como dijéramos anteriormente, dicha doctrina establece, como regla general, que el causante de un daño está impedido de deducir del importe de la indemnización que se le ha impuesto, la compensación o beneficios que el perjudicado haya recibido de una tercera persona o entidad . Nieves Cruz v. U.P.R., Op. de 31 de mayo de 2000, 2000 J.T.S. 91 a la pág. 1209. Esta norma está fundamentada en el principio de que el causante de un daño no debe beneficiarse de lo que el perjudicado haya recibido por la liberalidad de otros, ni de los servicios públicos extendidos por la comunidad a los necesitados. Sin embargo, la misma no ha de aplicarse mecánicamente. En este sentido, y conscientes del problema de la doble compensación, en Futurama Import Corp., 104 D.P.R. a la pág. 614, nuestro Tribunal Supremo señaló que en cada caso deberá examinarse el origen 291y propósito del beneficio colateral en cuestión, para decidir si éste se deduce, o no, de la indemnización. En cuanto a este problema que la doctrina de la fuente colateral arrastra consigo, el problema jurídico que implica que un agraviado reciba una doble compensación por los daños sufridos, en Futurama Import Corp., 104 D.P.R. alapág. 613: “Cuando la víctima es indemnizada, el perjuicio ha desaparecido. Por ello, no cabría demandar de nuevo reparación. El principio es simple. Pero su aplicación origina numerosas dificultades. Se refieren a que es delicado en ocasiones saber si ha sido total la indemnización de la víctima; cuando no la haya sido, la víctima puede demandar el complemento. Se refieren también a que, en algunos casos, el accidente permite a la víctima recibir de un tercero una suma de dinero; ¿se encuentra todavía la víctima con derecho para reclamar una indemnización al autor del daño? [■■■] La segunda constituye lo que puede llamarse el problema de la acumulación de las indemnizaciones. La víctima no puede acumular varias indemnizaciones por el mismo perjuicio. Así, cuando el daño le haya sido causado por varias personas, aquélla tiene derecho a reclamar reparación de la totalidad a uno sólo de los coautores; pero, si obtiene satisfacción, no puede reclamar ya nada a los restantes coautores [...]. La cuestión es más difícil de resolver cuando cabe dudar acerca de la naturaleza de la suma que la víctima ha recibido de un tercero: ¿es una indemnización?; en ese caso, su acción se ha extinguido, ya que está reparado el daño sufrido; ¿se trata de una suma abonada por otro título?; entonces, la víctima conserva su acción contra el autor del daño." (Enfasis en el original). Igual visión sobre la concurrencia de compensación de daños, previamente pagados por una aseguradora y vuelto a reclamar frente a otra, fue expresada en Canales v. Pan American, 112 D.P.R. 329 (1982). En resumen, la doctrina de fuente colateral no debe ser invocada automáticamente por los tribunales, sino que debe mediar en su aplicación un análisis ponderado de las circunstancias específicas del caso en cuestión. Esto es particularmente cierto en aquellos casos en que el demandante reclame compensación por pérdida respecto a los cuales ya hubiere recibido resarcimiento de otra cubierta de póliza de seguro. Como se sabe, un daño especial es aquel desembolso o pérdida que en forma específica reduce el patrimonio personal del reclamante, por ejemplo, gastos médicos. Por lo anterior, el dinero recibido por Gómez Pagán por los planes de incapacidad cubiertos directamente por el patrono son deducibles de la cantidad a recibir en concepto de pérdida económica según los ingresos y beneficios. No así las demás cantidades recibidas; por ejemplo, el seguro social. Por último, examinamos si erró el TPI al conceder una partida excesiva de costas por concepto de peritaje. El 29 de julio de 2002, Gómez Pagán presentó un Memorando de Costas Regla 44 de las de Procedimiento Civil donde desglosó las costas de la siguiente manera: Memorando De Costas Sellos de Radicación.$41.00 Presentación y Emplazamiento.$115.00 Fotocopias Totalidad del Proceso.$1,250.00 Sellos de Rentas Internas.$26.00 Peritaje (Dr. Jaime Del Toro).$8,850.00 292Gastos de Correspondencia.$34.00 La Regla 44.1(a) de las de Procedimiento Civil, 32 L.P.R.A. Ap. m, regula la imposición de costas. Esta tiene una función reparadora y su propósito es resarcir a la parte victoriosa los gastos necesarios y razonables incurridos durante el litigio. La imposición de costas a la parte vencida es mandatoria. Auto Servi, Inc. v. E.L.A., 142 D.P.R. 321, 326 (1997); Rodríguez Cancel v. A.E.E., 116 D.P.R. 443, 461 (1985); Ferrer Delgado v. Tribunal Superior, 101 D.P.R. 516, 517 (1973). El TPI determinará quién fue el litigante vencedor y cuáles gastos fueron necesarios y razonables. Por lo tanto, la concesión de las costas en una acción civil ordinaria, la imposición de costas a la parte perdidosa es mandatoria, una vez se reclaman oportuna y adecuadamente las mismas mediante memorando. Auto Servi, Inc. v. E.L.A., 142 D.P.R. 321 (1997); Santos Bermúdez v. Texaco, 123 D.P.R. 351, 355 (1989); Pereira v. I.B.E.C., 95 D.P.R. 28, 68 (1967). Iniciamos el análisis de la petición recordando que la jurisprudencia ha interpretado que las costas "son gastos (a) necesarios, (b) incurridos y (c) razonables [...] No se aprobarán gastos innecesarios, superfluos o extravagantes". Garriga, Jr. v. Tribunal Superior, 88 D.P.R. 245, 257 (1963). El pago de honorarios de peritos como gasto no es automático. Al pasar juicio sobre si procede o no el pago de dichos honorarios, el tribunal tiene que evaluar su naturaleza y utilidad a la luz de los hechos particulares del caso ante su consideración, teniendo la parte que los reclama el deber de demostrar que el testimonio pericial presentado era necesario para que prevaleciera su teoría. Rodríguez Cancel v. A.E.E., 116 D.P.R. 443, 461 (1985). Depende de si se trata de un perito del tribunal o de la parte y, con respecto a este último, la regla general es que son recobrables, a discreción del tribunal, sólo por vía de excepción y cuando las expensas que origine el pleito estén plenamente justificadas. Andino Nieves v. A.A.A., 123 D.P.R. 712, 716 (1989). Ahora bien, para que sean recobrables los honorarios de un perito, el testimonio de éste tiene que ser necesario para sostener la reclamación y para que la parte que reclama su recobro, prevaleciera. Arrieta Barbosa v. Chinea, 139 D.P.R. 525, 542 (1995). A la luz de la normativa antes expuesta, examinemos la situación que nos presenta el recurso ante nuestra consideración. Según se desprende de la sentencia dictada por el TPI, el testimonio del Dr. Jaime Del Toro fue una pieza fundamental para la determinación tomada. Así las cosas, es forzoso concluir que la prueba pericial ofrecida por el Dr. Jaime Del Toro fue utilizada y por tanto fue indispensable o esencial para que Gómez Pagán prevaleciera en el caso. En el pleito que evaluamos, no puede existir duda alguna en cuanto a que la extensión y naturaleza de los daños sufridos por Gómez Pagán estuvieron en controversia en el pleito ante el TPI. En tales circunstancias y según apreciamos de los autos ante nosotros, el Dr. Del Toro Soto es un perito intermedio contratado por Gómez Pagán como su perito para el pleito. Este no sólo evaluó y diagnosticó su condición psiquiátrica, sino que compareció a la vista en su fondo del caso, testificó sobre todos sus hallazgos y concluyó que la depresión de Gómez Pagán estaba vinculada directamente con el discrimen del cual fue víctima. El TPI entendió que el testimonio del perito fue necesario para demostrar los daños y angustias mentales y la cuantía de honorarios era razonable. Determinamos, pues, que actuó correctamente el TPI al conceder los honorarios del perito como costas y que éstas no fueron excesivas, por lo cual no intervendremos con su determinación. En mérito a lo expuesto, denegamos el auto de certiorari solicitado por Janssen (KLCE-2002-00952) y determinamos que procedía la imposición de costas y las concedidas no fueron excesivas. Por otro lado, confirmamos la determinación de discrimen por razón de edad que hiciera el TPI y modificamos la cuantía de *293daños. Por ultimo, modificamos la compensación por pérdida de ingresos que hiciera el TPI y devolvemos el caso al Tribunal de Primera Instancia para que calcule dicha pérdida de forma compatible con lo resuelto. Lo acordó el Tribunal y lo certifica la Secretaria General. Aida I. Oquendo Graulau Secretaria General ESCOLIO 2004 DTA 109 1. Mediante Sentencia Parcial de 24 de abril de 2002, archivada en los autos copia de su notificación el 2 de julio de 2002, el TPI decretó el archivo en cuanto a la reclamación contra Cándido González Martínez a virtud de las disposiciones de la Regla 39.1 de las de Procedimiento Civil.	01-03-2023	11-23-2022
https://www.courtlistener.com/api/rest/v3/opinions/4292795/	FILED JULY 10, 2018 In the Office of the Clerk of Court WA State Court of Appeals, Division III IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE STADELMAN FRUIT, LLC, a ) Washington limited liability company, ) No. 35165-3-III ) Respondent, ) ) v. ) ) UNPUBLISHED OPINION JIM D. VOORHIES, a single person, ) ) Appellant, ) ) JOHN E. HOWARD, as Personal ) Representative for the ESTATE OF ) FLORENCE E. HOWARD, ) ) Defendant. ) FEARING, J. — Plaintiff Stadelman Fruit, LLC filed suit to collect on a debt owed by defendant Jim Voorhies and to foreclose on a mortgage securing the debt. The trial court granted Stadelman Fruit summary judgment and dismissed counterclaims asserted by Jim Voorhies. We affirm. FACTS Plaintiff Stadelman Fruit, LLC operates as a fruit packing facility that handles, packs, markets, and sells fruit grown by Yakima Valley orchardists. As with other fruit No. 35165-3-III Stadelman Fruit, LLC v. Voorhies packing facilities, Stadelman Fruit enters agreements with orchardists, under which agreements an orchardist agrees to deliver the orchardist’s entire crop for a year and the facility agrees to store, process, pack, market, and sell the fruit on behalf of the orchardist. Often the fruit packing facility advances growing and harvesting costs to the orchardist so that the orchardist need not procure a bank loan. Defendant Jim Voorhies has operated apple orchards in Yakima Valley since at least 1996. Jim Voorhies first contracted with Stadelman Fruit to pack, store, and market Voorhies’ apple crop in 1996. Stadelman Fruit then advanced money to Voorhies for operating expenses. After the sale of the 1996 crop, Voorhies owed a deficit of $100,000 to Stadelman Fruit. Stadelman Fruit did not then demand payment of $100,000, but instead insisted that Voorhies deliver three loads of apples to Stadelman Fruit in 1997. Voorhies did so. Jim Voorhies next entered a fruit handling agreement with Stadelman Fruit in 1998. Stadelman Fruit loaned money to Voorhies that year. As in 1996, the proceeds from the 1998 crop did not offset the debt owed to Stadelman Fruit and the charges assessed by Stadelman Fruit for handling the crop. In a declaration, Jim Voorhies testified that Pete Stadelman, an owner of Stadelman Fruit, told him that he need not pay the debt. Pete Stadelman is deceased. From 1999 to 2007, Jim Voorhies delivered his apple crops to other fruit handling facilities. Hopefully, he enjoyed a financial return in one or more of those 2 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies years. An agent of Stadelman Fruit approached Jim Voorhies in early 2008 and Voorhies agreed to market his 2008 crop through Stadelman Fruit in exchange for advances for growing and harvest expenses from Stadelman Fruit. On March 5, 2008, Jim Voorhies and Stadelman Fruit entered a fruit handling agreement. The agreement required Voorhies to deliver to Stadelman Fruit all marketable apples grown in his orchards during the crop year. In exchange, Stadelman Fruit, in its sole discretion, handled all necessary processes for postharvest handling, packing, market and sale. Paragraph 1.2 of the agreement declared: Basis of Handling and Marketing: During the term of this Agreement, Grower [Jim Voorhies] hereby authorizes Handler [Stadelman Fruit] to handle and market Grower’s fruit described in paragraph 2.1 below in Handler’s regular pool(s) as Handler, in its sole discretion, determines to be in Grower’s best interest. Clerk’s Papers (CP) at 72. The agreement imposed onerous terms on Jim Voorhies regarding the wide discretion Stadelman Fruit reserved in handling and marketing Voorhies’ crop. In addition to the language of paragraph 1.2, paragraph 1.4 of the fruit handling agreement prescribed: Handling and Marketing: Handler shall handle and market Grower’s fruit in accordance with the customs and standards of the industry and in accordance with Handler’s standard practices, which Handler may, in its sole discretion, change from time to time, provided such changes shall apply to and treat all growers similarly situated with respect to quality, quantity and varieties of fruit alike. Unless otherwise agreed in writing between Handler and Grower, Handler shall have the following rights, obligations and authority with respect to the handling and marketing of Grower’s fruit: 3 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies 1.4.1 Packing - Grade Standards: Handler shall have the right and is authorized to determine the type of pack and packaging of Grower’s fruit to establish standards for packs and types of packs, which standards may be greater than those established by state, federal or industry grades. In addition, Handler reserves the right to establish quality and other reasonable standards for the purpose of determining which fruit, if any, may be placed in Handler’s controlled-atmosphere storage facilities. 1.4.2 Marketing Decisions: Handler is authorized to market all fruit subject to this Agreement at such times and prices, and in such quantities as the market will accept and as Handler, in its sole discretion, deems to be in the best interest of Grower. All sales and marketing decisions, including extensions of credit, price adjustments, the use of handlers, dealers, brokers, dealers, or traders and the geographic location of purchasers, shall be made in the sole discretion of Handler. CP at 72-73. The fruit handling agreement signed in March 2008 applied to the 2008 crop year. Nevertheless, paragraph 3 of the agreement declared that it automatically renewed in subsequent crop years unless either party chose to terminate the agreement in writing. The agreement further extended its terms to include all crop years until Jim Voorhies paid all debt owed Stadelman Fruit: 3. TERM: The term of this Agreement is for the 2008 crop year; provided, however, that this Agreement shall be considered as automatically renewed from year to year thereafter, unless either party terminates this Agreement by giving the other party written notice not later than March 1 of the crop year in which termination is desired. In addition, the term of this Agreement shall automatically be extended and shall include all subsequent crop years and crops grown during such crop years until all obligations, including advances, owed by Grower to Handler under the terms of this Agreement have been paid in full unless otherwise determined by Handler. In other words, it is contemplated that so long as Grower is indebted to Handler, Grower will continue to bring Grower’s fruit to Handler for the purpose of handling and marketing in order to 4 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies accommodate Handler’s economic interest as a handler and packer of Grower’s fruit and for the purpose of protecting Handler’s rights as a creditor of Grower. Termination shall be prospective only and shall not, unless otherwise agreed in writing, affect the rights, liabilities and obligations of the parties with respect to fruit which previously has been delivered by Grower to Handler for purpose of handling and marketing. CP at 75. The 2008 fruit handling agreement allowed Stadelman Fruit to provide advances or operating loans to Jim Voorhies, which loans Voorhies would secure with a mortgage. The parties anticipated use of the advances for growing expenses. Voorhies would not have marketed his apples through Stadelman Fruit without Stadelman Fruit’s willingness to provide operating loans. The advances clause in the agreement read: 7. ADVANCES: Handler may make discretionary advances to Grower to grow and harvest Grower’s fruit crop on such terms and conditions as Handler shall, in its sole discretion, determine to be appropriate. If Handler has agreed to make an advance to Grower, Grower hereby agrees to execute any security agreement, promissory note, financing statement, and other documents deemed reasonable and necessary by Handler to ensure the repayment of such advances and, in addition, any subordination agreements determined reasonable and necessary by Handler for such purpose. Handler’s decision to make advances in any particular instance shall not constitute an obligation or agreement by Handler to provide such advances to Grower in the future, and Grower acknowledges and agrees that such advances are discretionary with Handler. CP at 77. The March 2008 fruit handling agreement allowed Stadelman Fruit to offset any advancements and any handling charges against the proceeds of the sale of fruit: 5 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies 6.2 Right of Offset: The parties understand and agree that Handler shall have the right to offset all advances, assessments, charges and expenses owed by Grower prior to the payment of any funds to Grower or any third party having an interest in Grower’s crops or proceeds thereof. CP at 76. Voorhies also promised to execute any security documents Stadelman Fruit requested: 8.2 Security Documents: Grower shall, procure and deliver to Handler or execute for Handler, at its request, any additional security agreement, financing statement, negotiable warehouse receipt, promissory note for advance of credit given by Handler to Grower, or other writing necessary to create, preserve, protect or enforce Handler’s lien and/or security interest in Grower’s crops and its rights under state and federal law. CP at 77. The fruit handling agreement provided for periodic accountings: 10. PAYMENT AND ACCOUNTING: Handler shall, upon written request by Grower, provide periodic accountings of all Grower’s fruit sold to that date, less charges, advances and authorized deductions. Handler shall remit any balance due Grower within sixty (60) days after receipt of the proceeds from the sale of Grower’s fruit and final accountings have been made and completed, provided, however, that Handler does not guarantee collection on fruit sold, placed, or consigned. In determining whether any balances are owed by Grower, charges, expenses and advances in connection with all fruit subject to this Agreement shall be taken into consideration. . . . CP at 80. In the event Jim Voorhies failed to deliver a crop to Stadelman Fruit, paragraph 13 of the fruit handling agreement granted Stadelman Fruit liquidated damages in the sum of one hundred and twenty percent of the ordinary handling and marketing fees Stadelman Fruit would have received from the crop. Finally, paragraph 14.2 of the agreement 6 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies granted the prevailing party recovery of reasonable attorney fees and costs in the event of litigation between the parties. On the same day he signed the fruit handling agreement, Jim Voorhies executed two mortgages to secure Stadelman Fruit’s advances. The first mortgage encumbered two parcels of Voorhies’ real property, and the second burdened Voorhees’ interest in a real estate contract. Voorhies ultimately defaulted on the real estate contract, which left only the mortgage on the real property as security. The mortgage covered repayment of Stadelman Fruit’s advances and read: [T]o secure the payment of all sums due Mortgagee [Stadelman Fruit] pursuant to the crop handling agreement of even date herewith between Mortgagor [Jim Voorhies] and Mortgagee, including all sums advanced to provide crop financing for the crop to be grown upon the following described real estate, situated in the County of Yakima, State of Washington: PARCEL A: The West half of the West half of the Northwest quarter of Section 23, Township 14 North, Range 17, E.W.M., EXCEPT the right of way for County Road along the North line thereof. (Assessor’s Parcel No. 171423-22002) PARCEL B: The East half of the West half of the Northwest quarter of Section 23, Township 14 North, Range 17, E.W.M., EXCEPT right of way for County Road along the North line thereof. (Assessor’s Parcel No. 171423-22001) To secure the performance of each agreement of the mortgagor herein contained and the payment of all sums due Mortgagee in providing crop financing for the 2008 crop to be grown upon said premises, including 7 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies all renewals, modifications, and extensions thereof, and also such additional sums as shall be agreed upon. CP at 84-85. Stadelman Fruit handled all of Jim Voorhies’ crops for the 2008, 2009, and 2010 years. During this period, Stadelman Fruit advanced $575,252.95 to Voorhies. Stadelman Fruit received $464,080.22 in receipts from Voorhies’ apples to offset the advances, which left an overdue balance of $111,172.73. Notice that the proceeds from Jim Voorhies’ crop failed to pay the advances and Stadelman Fruit’s expenses, such that Voorhies never received any profit. Jim Voorhies testified that the parties never reached an agreement or understanding that the mortgage on his land extended to crop years 2009 and 2010. Stadelman Fruit also paid off a $42,380.92 senior lien and property taxes totaling $23,831.88 on the mortgaged land. Those payments raised the debt owed by Voorhies to Stadelman Fruit to the total sum of $177,385.53. Presumably because of the debt Jim Voorhies owed Stadelman Fruit, Stadelman Fruit refused to loan further sums to Jim Voorhies in 2011, but insisted that Voorhies deliver his 2011 crop to Stadelman Fruit. PROCEDURE On July 25, 2011, Stadelman Fruit initiated this suit to foreclose on its mortgage. In his answer, Jim Voorhies asserted that Stadelman Fruit was negligent and failed to follow Voorhies’ instructions in packing and selling the crop, which neglect artificially 8 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies deflated prices. Voorhies also complained of Stadelman Fruit’s accounting and claimed that the company engaged in deceptive acts in violation of the Consumer Protection Act, chapter 19.86 RCW. Voorhies, in his answer, admitted he executed the mortgage and agreed Stadelman Fruit handled his fruit from 2008-2010. Stadelman Fruit and Jim Voorhies filed cross motions for summary judgment. Tim Welch, Stadelman Fruit’s chief financial officer, filed a declaration to address Voorhies’ accounting concerns. Although Jim Voorhies alleged in a counterclaim that Stadelman Fruit negligently handled, packed, and marketed Voorhies’ fruit, Voorhies did not assert any facts supporting a claim of negligence in response to Stadelman Fruit’s summary judgment motion. The trial court granted Stadelman Fruit’s summary judgment motion in its entirety. The trial court awarded Stadelman Fruit $103,632.95 in prejudgment interest and $93,667.05 in attorney fees and costs. LAW AND ANALYSIS Issue 1: Whether the agreement between Stadelman Fruit and Jim Voorhies requires Voorhies to pay to Stadelman Fruit any deficiency after applying the proceeds from the sale of Voorhies’ crop to debt owed Stadelman Fruit? Answer 1: Yes. Jim Voorhies claims that he never agreed to pay any shortfall of money resulting from the proceeds of his crop failing to retire the debt incurred to Stadelman Fruit for advances and handling charges. Jim Voorhies does not posit that this argument raises a 9 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies question of fact. Instead, he asserts that one party should prevail as a matter of law based on the language of the fruit handling agreement. Voorhies argues he should prevail because the fruit handling agreement lacks any language requiring his payment of any shortfall of sums advanced. We disagree. A reviewing court attempts to determine the parties’ intent by focusing on the objective manifestations of the agreement, rather than on the unexpressed subjective intent of the parties. Max. L. Wells Trust v. Grand Central Sauna & Hot Tub Co. of Seattle, 62 Wash. App. 593, 602, 815 P.2d 284 (1991). The critical language in the fruit handling agreement arises in paragraph 7 that addresses advances. The language dictates: If Handler has agreed to make an advance to Grower, Grower hereby agrees to execute any security agreement, promissory note, financing statement, and other documents deemed reasonable and necessary by Handler to ensure the repayment of such advances . . . . CP at 77 (emphasis added). Although the language does not expressly require repayment of any shortfall, the language does not declare that Stadelman Fruit waives any right to repayment of the deficiency. Stadelman Fruit could demand that Jim Voorhies sign a promissory note for debt owed and this provision would serve no purpose if Jim Voorhies lacked an obligation to pay any deficiency after a credit for sale proceeds. Jim Voorhies emphasizes that paragraph 7 of the fruit handling agreement refers to “advances,” rather than “loans.” Nevertheless, Voorhies provides no authority to 10 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies distinguish between a loan and an advance and does not explain why advances need not be paid in full. Jim Voorhies also highlights that he never signed a promissory note and Stadelman Fruit never asked him to sign a note. Voorhies does not provide any authority, however, establishing that a promissory note must evidence a debt in order that the debtor become obligated to pay the debt. To the contrary, an “account” or a debt need not be evidenced by any writing or promise to pay. In re Stratman’s Estate, 231 Iowa 480, 1 N.W.2d 636, 641-43 (1942). Jim Voorhies asserts that Wallace v. Kuehner, 111 Wash. App. 809, 46 P.3d 823 (2002), requires a ruling in his favor. In Wallace, a father loaned his daughter money. Thereafter the father discarded the promissory note and declared that, if his daughter lost the money loaned, the amount would be taken from her inheritance. The court ruled that the father could not recover on the debt because of the agreement to collect the money only by deducting the sum from the daughter’s inheritance. Jim Voorhies supplies no testimony that Stadelman Fruit ever agreed to forgo amounts owed to it for the crop years 2008, 2009, and 2010. Jim Voorhies provided some testimony that Stadelman Fruit a decade earlier agreed to take any default in payment from the next year’s crop. We note that such a waiver of amounts owed occurred only after the sale of the crop. Voorhies provides no testimony that Stadelman Fruit waived payment after the sale of the 2008, 2009, or 2010 11 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies crops. Also, on appeal, Voorhies does not argue or provide authority that the earlier practice constituted a custom that bound Stadelman Fruit in later years. Anyway, the agreement in the earlier years was that Voorhies would deliver additional fruit to pay for the debt. Voorhies exhibits no willingness to deliver any further crops to Stadelman Fruit. This court reviews an order for summary judgment de novo. Keck v. Collins, 184 Wash. 2d 358, 370, 357 P.3d 1080 (2015). The court must determine whether the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. CR 56; Parkin v. Colocousis, 53 Wash. App. 649, 653, 769 P.2d 326 (1989). Summary judgment on an issue of contract interpretation is proper when the parties’ written intent, viewed in light of the parties’ other objective manifestations, has only one reasonable meaning. Hall v. Custom Craft Fixtures, Inc., 87 Wash. App. 1, 9, 937 P.2d 1143 (1997). We conclude that the fruit handling agreement bears only one reasonable meaning. Jim Voorhies does not provide extrinsic testimony that clashes with that meaning. Voorhies agrees the meaning of the fruit handling agreement creates only a question of law. Issue 2: Whether the mortgage secured debt for crops years after crop year 2008? Answer 2: Yes. 12 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies Jim Voorhies argues that the mortgage he signed in March 2008 did not extend to any debt owed for the 2009 and 2010 crops. Since crops delivered to Stadelman Fruit in 2008 and the beginning of 2009 retired the 2008 debt, Voorhies contends that debt no longer encumbers his property through the mortgage. In so arguing, Voorhies relies on his own testimony that the parties never entered an agreement or understanding that the mortgage applied to debt other than debt incurred in 2008. He does not testify, however, that the parties ever expressly concurred that the mortgage did not cover debt beyond crop year 2008. He provides no testimony that the parties bespoke about what crop years the mortgage controlled. We deem the question of the debt covered by the mortgage to be controlled by the language of the mortgage and fruit handling agreement. The mortgage signed by Jim Voorhies in March 2008 posited that it secured “the payment of all sums due [Stadelman Fruit] in providing crop financing for the 2008 crop to be grown upon said premises, including all renewals, modifications, and extensions thereof, and also such additional sums as shall be agreed upon.” CP at 85. The debt created by advances in 2009 and 2010 could be considered renewals or modifications. But we need not base our decision on such a conclusion since the 2009 and 2010 debt resulted from such “additional sums as shall be agreed upon.” CP at 85. The language does not require that both parties agree that the mortgage will secure additional sums, only that the parties agree to additional sums provided by Stadelman Fruit for crop financing. Jim Voorhies obviously agreed to the sums advanced in 2009 and 2010 or he 13 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies would not have accepted the funds. Issue 3: Whether Jim Voorhies owes interest on the debt owed to Stadelman Fruit? Answer 3: Yes. Jim Voorhies next contends that the fruit handling agreement does not afford Stadelman Fruit interest on any debt owed. Nevertheless, an agreement need not expressly provide for interest on any debt for interest to be owed. RCW 19.52.010 reads, in part: (1) Every loan or forbearance of money, goods, or thing in action shall bear interest at the rate of twelve percent per annum where no different rate is agreed to in writing between the parties. . . . The statute applies to advances from one party to another. Hewitt v. Jones, 149 Wash. 360, 364-65, 271 P. 76 (1928); Puget Sound Telephone Co. v. Telechronometer Company of America, 130 Wash. 468, 481, 227 P. 867 (1924). Stadelman Fruit charged Jim Voorhies for interest from the date it filed its complaint. Voorhies provided the trial court no countervailing calculation for interest owed. The trial court correctly granted interest to Stadelman Fruit. Issue 4: Whether Jim Voorhies created a genuine issue of material fact regarding the accounting provided by Stadelman Fruit as to amounts owed? Answer 4: No. Next, Jim Voorhies claims Stadelman Fruit failed to account for all of Voorhies’ apple revenue in the company’s accounting. Stadelman Fruit included in its July 2011 14 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies complaint an accounting summary, which included statements listing the advances made, costs incurred, and sale proceeds received by Stadelman Fruit. Voorhies never then challenged the accounting. As part of this lawsuit, Jim Voorhies avers that Stadelman Fruit did not credit three bins of apples and thereby failed to account for $26,014.74 in revenue during 2008. Nevertheless, Stadelman Fruit’s Chief Financial Officer Tim Welch’s declaration and attached accounting establishes that Stadelman Fruit credited Voorhies for the purported missing pool returns totaling $26,014.74. Jim Voorhies contends that Stadelman Fruit’s accounting for his individual return for 2009 shows a “net” of $25,954.75, while the “pool return” shows a net credit to his account of $61,662.89, a difference of $35,708.14. Tim Welch addressed this concern. Voorhies misreads the pool and grower statements. Welch observed: In sum, both statements are wholly consistent as to the revenue and charges to Pool 4, that is, Mr. Voorhies’ apples, and that analysis is quite simple. That is, the apples in Pool 4 returned $88,118.91 in gross revenue, Pool 4 was therefrom charged with $62,164.14 in packing/storage charges, and the difference of $25,954.75 was credited to Mr. Voorhies account. The matter raised by Mr. Voorhies only serves to cause confusion as he refers to the Pool Statement’s listing of internal accrual/cost type accounting entries used by Stadelman in the management of its operation and confuses that the “net amount credited to your account” is referring to Stadelman (and not Mr. Voorhies) as Stadelman is the intended user of the “Pool Statement.” CP at 460-61. Tim Welch’s declaration demonstrates the pool returns to which Voorhies refers actually are from 2010. 15 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies Jim Voorhies next complains Stadelman Fruit did not credit him $11,896.11 in 2010. Nevertheless, Tim Welch’s declaration establishes that Stadelman Fruit credited Voorhies with the correct amount and Voorhies again misread the accounting statements. Although Stadelman Fruit initially omitted the income in its accounting, the company later credited, as shown in records attached to Welch’s declaration, the full $11,896.11. Issue 5: Whether any facts can sustain Jim Voorhies’ claim under the Consumer Protection Act? Answer 5: No. Jim Voorhies also alleges the trial court incorrectly dismissed the Washington Consumer Protection Act counterclaim. The five elements of a private Consumer Protection Act action include: (1) an unfair or deceptive act or practice, (2) in the conduct of trade or commerce, (3) which impacts the public interest, (4) injury to the plaintiffs in their business or property, and (5) a causal link between the unfair or deceptive act and the injury suffered. Mason v. Mortgage America, Inc., 114 Wash. 2d 842, 852, 792 P.2d 142 (1990). Jim Voorhies highlights purported accounting inaccuracies to contend that Stadelman Fruit’s bookkeeping constituted an unfair practice that could impact other growers with whom Stadelman Fruit conducted business. But we have concluded no facts show any accounting error. Issue 6: Whether the independent duty doctrine bars Jim Voorhies’ negligence 16 No. 35165-3-III Stadelman Fruit, LLC v. Voorhies claim? Answer 6: We need not address this issue since Voorhies no longer claims Stadelman Fruit performed negligent acts. Jim Voorhies claims the independent duty doctrine, contrary to the trial court’s ruling, does not bar his negligence claim. To the extent the independent duty doctrine still exists, the doctrine may bar a party to a contract from asserting a tort theory against the other contracting party. Alejandre v. Bull, 159 Wash. 2d 674, 683, 153 P.3d 864 (2007). In response to Stadelman Fruit’s summary judgment motion to grant it judgment for debt owed and to dismiss Jim Voorhies’ counterclaims for Consumer Protection Act violations and negligence, Voorhies raised no facts supporting his negligence theory. During oral argument before this court, Voorhies, in response to questioning as to whether he still asserted a negligence claim, answered that no negligence was asserted before the trial court. Since Voorhies no longer asserts a claim of negligence, we need not address whether the independent duty doctrine bars any claim. Issue 7: Whether this court should grant Stadelman Fruit reasonable attorney fees and costs incurred on appeal? Answer 7: Yes. Both Jim Voorhies and Stadelman Fruit request reasonable attorney fees according to the attorney fees clause in the fruit handling agreement. Pursuant to RAP 18.1, we grant Stadelman Fruit, as the prevailing party, reasonable attorney fees and costs incurred 17 No. 35165-3-111 Stadelman Fruit, LLC v. Voorhies on appeal. CONCLUSION We affirm the trial court's grant of summary judgment in favor of Stadelman Fruit for amounts owed, for foreclosure of the mortgage, and for dismissal of Jim Voorhies' · counterclaims. We grant Stadelman Fruit reasonable attorney fees and costs incurred on appeal. A majority of the panel has determined this opinionwill not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040. WE CONCUR: Korsmo, J. .1 { 5-)cihJ?Uc Siddoway, J. {J 18	01-03-2023	07-10-2018
https://www.courtlistener.com/api/rest/v3/opinions/3278199/	Respondent moves the court to dismiss the appeal in the above-entitled cause for the reasons: First, that the judgment appealed from is not an appealable order within the meaning of section 963 of the Code of Civil *Page 557 Procedure; second, that the order appealed from is not subject to review, and, third, that the appellant in his opening brief has failed to point out any error in any ruling of the trial court or in any order appealed from. [1] In In re Yoder, 199 Cal. 699 [251 P. 205], it is held that an order denying an application to set aside an order of the Superior Court on the ground of fraud is an appealable order, as the same is a special order made after final judgment, within the meaning of subdivision 2 of section 963 of the Code of Civil Procedure, and it is held there in effect that [2] although the general rule is that an appeal does not lie from an order denying a motion to vacate a judgment where the motion merely called upon the court to repeal or overrule the former ruling on the same facts, there are certain well defined exceptions to said rule, and such an order is appealable where the circumstances are such that an appeal from the first order would be vain for lack of a record showing the rights of the aggrieved party. Appellant in this case had made motion for relief under section 473 of the Code of Civil Procedure to set aside a judgment of default entered on the cross-complaint. [3] The third objection as to the matters contained in the opening brief is one that cannot be raised on a motion to dismiss an appeal. The motion to dismiss the appeal is therefore denied. Conrey, P.J., and Houser, J., concurred.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/4239142/	NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. IN THE ARIZONA COURT OF APPEALS DIVISION ONE STATE OF ARIZONA, Respondent, v. ALLEN JAMES ROBINSON, Petitioner. No. 1 CA-CR 17-0166 PRPC FILED 1-25-2018 Petition for Review from the Superior Court in Maricopa County No. CR2012-006890-002 DT The Honorable Jeanne M. Garcia, Judge REVIEW GRANTED; RELIEF DENIED COUNSEL Maricopa County Attorney’s Office, Phoenix By Arthur G. Hazelton, Jr. Counsel for Respondent Allen James Robinson, Florence Petitioner MEMORANDUM DECISION Presiding Judge Lawrence F. Winthrop, Judge Jennifer B. Campbell, and Judge Paul J. McMurdie delivered the decision of the Court. STATE v. ROBINSON Decision of the Court PER CURIAM: ¶1 Petitioner Allen James Robinson seeks review of the superior court’s order denying his petition for post-conviction relief, filed pursuant to Arizona Rule of Criminal Procedure 32.1. This is petitioner’s first petition. ¶2 Absent an abuse of discretion or error of law, this court will not disturb a superior court’s ruling on a petition for post-conviction relief. State v. Gutierrez, 229 Ariz. 573, 577, ¶ 19 (2012). It is petitioner’s burden to show that the superior court abused its discretion by denying the petition for post-conviction relief. See State v. Poblete, 227 Ariz. 537, 538, ¶ 1 (App. 2011) (petitioner has burden of establishing abuse of discretion on review). ¶3 We have reviewed the record in this matter, the superior court’s order denying the petition for post-conviction relief, and the petition for review. We find that petitioner has not established an abuse of discretion. ¶4 We grant review and deny relief. AMY M. WOOD • Clerk of the Court FILED: AA 2	01-03-2023	01-25-2018
https://www.courtlistener.com/api/rest/v3/opinions/1565117/	55 F.2d 317 (1932) UNITED STATES v. JOTHAM BIXBY CO. No. 4070. District Court, S. D. California, Central Division. January 11, 1932. Samuel W. McNabb, U. S. Dist. Atty., and Sharpless Walker, Asst. U. S. Atty., both of Los Angeles, Cal. Frank P. Doherty, of Los Angeles, Cal., for defendant and intervener. HOLLZER, District Judge. This is a condemnation proceeding instituted by the federal government to condemn a site for a post office and custom house in what was formerly the city of San Pedro, but is now part of the city of Los Angeles. The defendants include the city of Los Angeles, its board of park commissioners, and its board of library commissioners, and, in addition, a large number of individuals who are the heirs of the original owners of a tract of land known as the Palos Verdes rancho. The site which the government seeks to condemn comprises the north 400 feet of a tract of land which at one time constituted a part of said rancho, and which said tract of land, by a decree of court entered in certain partition proceedings under date of September 25, 1882, was set apart to the public as a plaza. Approximately twenty-six years ago, and prior to the consolidation of the two cities, the authorities of the city of San Pedro constructed a city hall on the north end of the plaza tract. About a year later a public library was constructed on another portion of the plaza and this building at present is being used by the Chamber of Commerce and also for other purposes. In addition, the city of Los Angeles a few years ago replaced the former city hall of San Pedro with a modern seven-story municipal office building. The remaining portion of the plaza, including the site here sought to be condemned, has been developed into a park, and has been so used for many years. The city of Los Angeles and its park and library commissioners concede that the government is entitled to condemn the site mentioned. The only parties who are contesting this proceeding are the defendant C. M. Patten & Co. and the intervener, Grace M. Wilder, neither of whom claims any interest in the property. The latter asserts she is a taxpayer of said city of Los Angeles. It is the contention of said defendant and said intervener that, inasmuch as the site here sought to be taken is a part of a tract of land already dedicated to a public use (in this in 318 stance, a municipal park), the same may not be condemned by the federal government for a post office and custom house or any other public use inconsistent with that of a public park. In support of this contention, counsel cites the case of Spires v. City of Los Angeles, 150 Cal. 64, 87 P. 1026, 11 Ann. Cas. 465; Kelly v. Town of Hayward, 192 Cal. 242, 219 P. 749; Humphreys v. City and County of San Francisco, 92 Cal. App. 69, 268 P. 388; Slavich v. Hamilton, 201 Cal. 299, 257 P. 60; Hall v. Fairchild-Wilton Co., 66 Cal. App. 615, 227 P. 649; Mulvey v. Wangenheim, 23 Cal. App. 268, 137 P. 1106; and Church v. City of Portland, 18 Or. 73, 22 P. 528, 6 L. R. A. 259. These decisions, however, merely hold that a municipality may not use a public park for any purpose which would be inconsistent with the use of the property for park purposes. In none of these cases was the federal government a party. In none of them was the court called upon to decide the issue involved here, namely, the right of the government of the United States to condemn for purposes of a post office and custom house land which was already in public use as a park. As pointed out by the Supreme Court of the United States in Kohl et al. v. U. S., 91 U.S. 367, 371, 23 L. Ed. 449, the authority of the federal government to appropriate lands or other property within the states for its own uses and to enable it to perform its proper functions is essential to its independent existence and perpetuity: "The powers vested by the Constitution in the general government," said Mr. Justice Strong, speaking for the Court, in that case, "demand for their exercise the acquisition of lands in all the States. These are needed * * for custom-houses, post-offices, and court-houses, and for other public uses. If the right to acquire property for such uses may be made a barren right by the unwillingness of property-holders to sell, or by the action of a State prohibiting a sale to the Federal government, the constitutional grants of power may be rendered nugatory, and the government is dependent for its practical existence upon the will of a State, or even upon that of a private citizen. This cannot be." Again in the same opinion the learned justice observes (pages 373, 374 of 91 U. S.): "The proper view of the right of eminent domain seems to be, that it is a right belonging to a sovereignty to take private property for its own public uses, and not for those of another. Beyond that, there exists no necessity; which alone is the foundation of the right. If the United States have the power, it must be complete in itself. It can neither be enlarged nor diminished by a State. Nor can any State prescribe the manner in which it must be exercised. The consent of a State can never be a condition precedent to its enjoyment." (Emphasis ours.) This doctrine has been reiterated many times by our Court of last resort. "It is now well settled," declares Mr. Justice Gray speaking for the Court in Chappell v. U. S. (160 U.S. 499, 509, 510, 16 S. Ct. 397, 400, 40 L. Ed. 510) "that whenever, in the execution of the powers granted to the United States by the constitution, lands in any state are needed by the United States for a * * * customhouse, courthouse, post office, or any other public purpose, and cannot be acquired by agreement with the owners, the congress of the United States, exercising the right of eminent domain, and making just compensation to the owners, may authorize such lands to be taken, either by proceedings in the courts of the state with its consent, or by proceedings in the courts of the United States with or without any consent or concurrent act of the state, as congress may direct or permit" citing Kohl v. U. S., supra. (Emphasis ours.) In accordance with the foregoing rule of law announced by our court of last resort, that tribunal, in U. S. v. Gettysburg Electric R. Co., 160 U.S. 668, 16 S. Ct. 427, 431, 40 L. Ed. 576, sustained the right of the federal government to condemn property already dedicated to a public use. In the last-mentioned case the land sought to be taken was a right of way which was being used by the defendant railroad company for the operation of its railroad pursuant to a charter granted to it by the state of Pennsylvania, and the federal government proposed to use this land for the purpose of adding the same to a memorial battle field and park. In upholding the paramount right of the national government to condemn this property, the court pointed out: "The power of congress to take land devoted to one public use for another and a different public use, upon making just compensation, cannot be disputed." Following this same doctrine it was held in the case of U. S. v. City of Tiffin (C. C.) 190 F. 279, that the federal government had the power to condemn a public alley for a post office site. In that case, the city of Tiffin opposed the proceeding upon the 319 ground that the land sought to be condemned was already dedicated to a public use, and that neither an act of Congress nor an act of the state Legislature had expressly authorized the taking of this particular piece of property. In support of this contention, it also argued that land in public use cannot be taken for another and inconsistent public use under general legislative power of condemnation, but that the right must appear to seize the particular property by express provision directed toward the special property in some pertinent legislation, or by the inevitable implication arising from such special legislation. In disposing of this contention, Judge Killits aptly pointed out (page 280, 281 of 190 F.): "The attempt to apply the rule, however, in this case ignores the difference in status between the United States in its relation to lands sought to be devoted to public use and the parties attempting to condemn in the cases giving rise to the rule. "The United States has paramount authority in the matter of taking any property within its borders for those public uses which are within the constitutional reservations to the general government. Its rights in this behalf are inherent in its sovereignty, and are prior to constitutions and statutes. The Constitution does not operate to create this right, but only to limit its exercise to certain objects. The several states for their own administrative purposes within their own borders hold authority of the same generally broad and extraconstitutional nature. The principle of strict construction of either the nature or extent of this right applies to neither sovereignty for the reason that such right is a very part of the sovereignty itself, existing from the beginning. This does not mean, however, that no power may intervene to prevent arbitrary action, for such power certainly abides with the courts. "The rule offered in behalf of the city of Tiffin, on the other hand, is one which is the fruit of the application of the doctrine of strict construction of the power to invoke the principle of eminent domain granted by the Legislature to inferior public administrative corporations and to combinations of individuals who are engaging for their own profit in a public service. Because obligations for the public benefit are imposed upon municipal and public service corporations in the administration and conduct of their affairs, to them is delegated this attribute of sovereignty, which they can exercise only within the express provision of the legislative delegation strictly construed. "An examination of the cases which support the rule in question shows that in each in which the right to condemn was denied the attempting condemnor was a municipal or a private public service corporation, which was vanquished by the application in this particular sense of the general principle that the legislative grant to it of a right to condemn must be strictly construed. No authority is shown, either in the briefs or in our own researches, in which the rule is applied against the sovereignty which it was established to protect. The Legislature, speaking the voice of paramount authority over all property, private as well as public, may, it is conceded, authorize the submission of property already in the public use to another public use, even when the conflicting public uses are those exercised by private public service corporations, if it specially determines upon such a course by particular legislation, and the rule invoked but operates to hold this right in the sovereign power until it clearly appears to have been given to some creature of the sovereignty, such as a municipal or public service corporation. The rule, having existence only to protect the sovereign power against its creatures, plainly, we think, may not consistently be offered to obstruct the supreme authority in the exercise of its administrative and sovereign functions. * * "Assuming the rule is applicable, then the government, after Congress has passed the necessary general legislation to establish a post office in this particular city, and the Secretary of the Treasury had exercised the semi-judicial function cast upon him by law to determine the necessity of any particular plot of ground and had selected this strip of alley, the maintenance of which is of very slight consequence to the city of Tiffin at large, would be compelled to await a session of Congress and reopen the whole matter for the purpose of getting an act passed specially designating this alley as one of the component parts of the site. It seems to us the statement of that proposition is all that is necessary to prove that the sovereign power ought not to be so hampered, and that the rule, having its birth in a jealousy for the rights of sovereignty, should not be extended to embarrass the object of its service." We hold, therefore, that the limitation which prohibits a municipality from using for another and inconsistent purpose land already *320 dedicated to a public use, as, for example, a public park, does not apply against the government of the United States. Likewise, we hold that no additional legislation on the part of Congress is necessary to enable the national government to condemn the specific parcel of property involved herein. Besides the general power granted by the Act of Congress of August 1, 1888, c. 728, 25 Stat. 357 (40 USCA §§ 257, 258), authorizing the Secretary of the Treasury to acquire by condemnation sites for post office and custom houses, Congress, by legislation approved March 5, 1928, chapter 126, 45 Stat. 162, 177, passed a statute entitled: "An Act Making appropriations for the Treasury and Post Office Departments for the fiscal year ending June 30, 1929, and for other purposes." This act, among other purposes, contained the following: "San Pedro, California, post office, customhouse, and so forth: For the acquisition of a site and toward the construction of building, including any tunnel that may be necessary, in addition to appropriation previously made, $100,000; and the Secretary of the Treasury is authorized to enter into contracts for the entire estimated cost of such building, site, and tunnel for not to exceed $575,000 in lieu of $60,000 fixed in the Act of March 4, 1913." It is conceded that the Secretary of the Treasury of the United States has duly selected and designated as the site for the post office and custom house in San Pedro the particular parcel of land involved herein, and has authorized the Attorney General of the United States to institute the present proceeding. In the light of the evidence introduced at the hearing, there can be no doubt that one of the unique and superior advantages of the property sought to be taken lies in the fact that the expeditious transfer of mail between the railroad tracks at San Pedro and the building to be erected on the proposed site can readily be accomplished through the construction of a tunnel connecting said tracks and such building. On the other hand, no other available site, so far as the evidence discloses, would render practicable the tunnel plan for facilitating the handling of mail. Therefore it becomes apparent that by the statute last mentioned Congress had direct reference to the land here sought to be condemned. Finally, it should be noted, as abundantly established by the evidence, that the land sought to be taken possesses a combination of advantages both as regards the governmental departments and the general public which no other offered or available site affords. The property in question, by virtue of its close proximity to the Harbor Channel, would render more prompt and efficient all federal activities with the extensive shipping interests at the harbor, including the functions of such departments as the Customs, Immigration, Public Health, Quarantine, etc. The proposed site affords an unobstructed view of the Harbor Channel and the harbor, and the arrival and departure of steamships and the location of vessels at anchor. The establishment of appropriate governmental departments at this site would permit the prompt transaction of all governmental business with ships and their cargoes, and in a manner likely to cause the least delay and expense to those affected. As already pointed out, the proximity of the railroad tracks and the topographical character of the proposed site make feasible the construction of the tunnel connecting said tracks with the proposed post office, thereby expediting and facilitating the transfer of mail. In addition, the proposed site is surrounded on three sides by public thoroughfares and on the remaining side by a public park, thereby offering unusual facilities for fire protection and parking space. We conclude, therefore, that the purpose to which the land in question is to be applied is a more necessary public use than the present use thereof, that Congress has authorized the taking of said property, and has provided for compensation to be paid for the same, and that the national government is entitled to condemn said land in this proceeding. Counsel for the government will prepare and serve findings and decree in conformity with this opinion, said decree to provide for a reference to a special master to hear and report upon further proceedings to be had herein. An exception is allowed to the defendant C. M. Patten & Co., and the intervener, Grace M. Wilder.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1565821/	159 F.2d 163 (1946) FEDERAL DEPOSIT INS. CORPORATION v. CONGREGATION POILEY TZEDECK et al. No. 100, Docket 20399. Circuit Court of Appeals, Second Circuit. December 31, 1946. 164 Victor Levine and M. Leonard Shapero, both of Syracuse, N. Y., for appellants Congregation Poiley Tzedeck, Meyer Voit, Solomon Spector, Hyman Rosenbloom, Max Rosenbloom, Harry Weiner, and Barnet Simon. Benjamin M. Gingold, of Syracuse, N. Y., for appellants Israel Gingold, Bessie Gingold, and Jacob Engel. W. Chase Young and Francis L. McElroy, both of Syracuse, N. Y., for appellee. Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges. L. HAND, Circuit Judge. This is an appeal from a judgment entered in an action brought to procure a declaration of the plaintiff's rights in a parcel of land in the City of Syracuse, and against some of the defendants, as guarantors of a bond and mortgage upon the same parcel. The judge found the facts as follows. On December 4, 1922, Jacob Weiner and Israel Gingold, who were record owners of the parcel in question, and their wives, conveyed it to Congregation Poiley Tzedeck, a New York religious corporation, by a deed in which the Congregation covenanted not to use the premises "for any purposes other than synagogue purposes or pertaining directly to the benefit and welfare of a synagogue only. And it is expressly understood that the said covenant shall attach to and run with the land. This deed shall embody a certain agreement made and entered into this day between the Congregation Poiley Tzedeck and the Society Chevra Kadisha of Poiley Tzedeck, pertaining to the land herein conveyed." The agreement, so incorporated into the deed, recited that the Society was the owner of the parcel and wished to give it to the Congregation, which was willing to accept it upon the condition that Weiner and Gingold, the record owners, should execute a deed in the same terms as the covenant just recited. Some three years later, on February 6, 1926, the Congregation executed a bond for $25,000 to the plaintiff's assignor, the First Trust and Deposit Company of Syracuse, secured by a mortgage upon the parcel, which did not mention either the restrictive covenant in the deed from Weiner and Gingold, or the agreement between the Congregation and the Society, both of which were, however, on record in the county clerk's office of Onandaga County, where the land was situated. Twenty-five individuals executed a guarantee to accompany the bond, each guarantee being limited to $1000; and the individual defendants, other than Gingold and his wife and Weiner's wife, were among these guarantors. The Congregation defaulted upon payments under the bond, and the plaintiff wishes to foreclose. An action for a declaratory judgment was brought in August, 1944, and a judgment was entered June 8, 1945, in which the court made three declarations: (1) That a judgment, earlier recovered by the 165 plaintiff for unpaid interest and taxes, did not bar an action for the principal and interest of the mortgage, or for later taxes; (2) that the covenant in the deed to the Congregation, restricting the parcel to use as a synagogue was invalid; and (3) that the guarantors were severally liable for $1000 with interest from the date of their defaults. The cause came on for trial on January 18, 1945, at a time when none of the defendants had filed an answer. However, Engel a guarantor and Gingold and his wife appeared by attorney, the plaintiff put in some evidence, and the case went over to March 23, 1945. Meanwhile on February 7, 1945, Engel, the two Gingolds and four of the guarantors not including Jacob Weiner filed answers, and on the adjourned day they appeared by attorney, together with the Congregation, two other guarantors and Jacob Weiner and his wife. The judge opened the defaults of all these, and they put in evidence on the adjourned day; he filed his opinion on April 23, 1945, his findings on May 25, 1945, and his judgment on June 8, 1945 as we have said. The Congregation filed an answer on April 15, 1946, almost a year after entry of the judgment. On July 10, 1945, five of the guarantors who had answered, filed notices of appeal; so did the Congregation and a sixth guarantor, who had not answered. Engel and Gingold and his wife filed notices of appeal on April 15, 1946; Jacob Weiner has never filed one. The appellants allege in their reply brief that Gingold and Weiner "served a notice" (a notice of appeal) "on counsel for the appellee on time," and that it was not returned; and we shall assume that this is true. They assert that this was adequate compliance with Federal Rules of Civil Procedure, Rule 73(a), 28 U.S.C.A. following section 723c. None of the appellants challenge the first of the three declarations made in the judgment. The first question is whether the appeal of Gingold and Engel, taken by merely serving a notice of appeal upon the appellee, can stand under Rule 73(a). Before the advent of the New Rules and the same thing still remains true in the admiralty some allowance of an appeal by a judge was a condition upon the transfer of the cause to the upper court;[1] and, even though the strictness of this requirement was somewhat relaxed in Georgia Lumber Co. v. Compania de Navigacion Transmar,[2] which treated a notice of appeal filed in the district court as an application for allowance, nevertheless it had to be followed by actual allowance, although that might be after the time to appeal had expired. This has been followed in The Tietjen & Lang No. 2;[3] Cohen v. Casey;[4] and In re Granada Apartments.[5] The reasons given for requiring any allowance of an appeal, as they were stated in Alaska Packers Association v. Pillsbury, supra (301 U.S. p. 177, 57 S. Ct. 683), were "that there may be some assurance that the suit is one in which there may be a review * * . In this way improvident and unauthorized appeals are prevented." A mere notice to the appellee was not an equivalent, because no judge might ever have allowed the appeal. Now that the last remnant of judicial supervision over the allowance of appeals which had indeed always been in practice only a formality has been swept away, the question arises whether mere notice even though not filed, but only served upon the appellee will not satisfy all practical requirements. In Reconstruction Finance Corporation v. Prudence Securities Advisory Group,[6] the court held that the failure to make timely application in the circuit court of appeals for leave to appeal which was a condition upon appealing from the order then in question was not fatal to the appeal in a case where the appellants had filed notices of appeal in the district court. Douglas, J., said that "the court has discretion, where the scope of review is not affected, to disregard such an irregularity in the interests of substantial justice," i.e., timely application was not an unbreakable condition upon transfer of the cause to the upper court. In that case the appellants' 166 mistake had been extremely excusable; they had acted in reliance upon an earlier decision of ours that an appeal lay without leave and that it was enough to file a notice of appeal as in other cases. The Supreme Court had overruled our decision after their time to appeal had expired, so that, in spite of their correct procedure as the law stood our mistake had forfeited their rights. That it was only some such circumstances as these which made it proper to grant the relief, the court itself recognized at the time; and both the First Circuit[7] and we[8] have since then acted upon that admonition. In the case at bar Engel and Gingold offer no excuse whatever except that they were following New York practice, which requires notice of appeal to be both filed and served[9] and with which, therefore, they incidentally did not comply. Whether the New York decisions hold that service alone may be enough, we do not stop to consider; for the excuse is insufficient anyway. Besides, we think that, even were it a much better excuse than in fact it is, some paper must be filed in at least one court or the other, to constitute a notice of appeal under Rule 73(a); and that a transaction in pais between the parties, of which no record is made in either court, will not serve. More is at stake than informing the appellee that the appellant is not content with the judgment. The courts themselves ought to be able to learn with assurance when the cause has been transferred, for their power to act depends upon that event. Nothing would be more conducive to uncertainty than to make the transfer turn upon transactions between the parties, which were nowhere recorded, but from which it might eventually be concluded that the appellant had adequately advised the appellee. Were that the test, we could not rationally stop at the service of a formal notice of appeal upon the appellee; any information would be enough: a letter, even an oral statement, provided it were explicit. To subject the relative powers of the courts to doubt until such vexed issues were decided perhaps at the end of the appeal itself would be anything but a step in aid of justice; the situation is one which demands some ready means of ascertaining the moment when occurs this "crux of `taking an appeal.'"[10] The least requirement, which will be tolerable, is that some paper shall be accessible in the records of a court upon which both judges and parties can rely. Crump v. Hill,[11] is entirely in accord with this; the appellant had filed in the district court a paper which indicated his intent to appeal. True, it was a waiver of notice of appeal by the appellee; but that was unanswerable evidence of the appellant's purpose. The appeals of Engel and of Gingold and his wife are dismissed. With these out of the case, the validity of the covenant in the deed of Weiner and Gingold to the Congregation is not before us, for Weiner has not appealed, and the Society was not made a party. The Congregation itself, as mortgagor has no standing vicariously to raise the issue; it has no defense to the mortgage and must suffer the sale in foreclosure of whatever title it held. It would have been absurd to allow it as covenantee to enforce a covenant against itself as covenantor; and if it could not do that, it can have no standing to enforce the covenant against its own grantee, the mortgagee. It results that the judgment is conclusive upon Weiner and Gingold. Nothing remains but the third declaration in the judgment: i.e., that the guarantors are severally liable for $1000 of the debt. The only suggested defence to this liability is that the guaranties were conditional upon the validity of the covenant in the deed of Weiner and Gingold. For this there is no shadow of support; the guaranties were embodied in a formal written instrument, executed when the plaintiff's assignor lent the money to the Congregation, which did not contain a syllable to intimate that the obligation was conditional in any way whatever. The *167 only testimony on the subject was that of one, Voit, who described the building erected on the locus in quo, and how intimately it was connected in use with the synagogue. If anything of what he said could by the widest stretch be thought relevant, it was that the Congregation borrowed the money to build this building; but to suppose that this imported as a condition upon the undertaking that the property should always be used for religious purposes, would be in direct conflict with one obvious purpose of the guaranties: i.e., that the guarantors should have the protection of the land. They vaguely suggest that they have some sort of legally protected interest in the enforcement of the covenant; but that too is not true. As members of the Congregation, they have no authority to enforce its rights; and even if they had, the Congregation itself could not enforce the covenant, as we have shown. Finally, to the objection that the Attorney General of New York, and the Society Chevra Kadisha were not made parties to the action, it is a complete reply that, even though they should have been which we do not for a moment suggest the objection did not survive answer. Rule 12(h). The appeals are wholly devoid of any merit. The first and third declarations in the judgment of June 8, 1945 are affirmed. The appeals from the second declaration in that judgment are dismissed. NOTES [1] Alaska Packers Association v. Pillsbury, 301 U.S. 174, 57 S. Ct. 682, 81 L. Ed. 988; McCrone v. United States, 307 U.S. 61, 59 S. Ct. 685, 83 L. Ed. 1108. [2] 323 U.S. 334, 65 S. Ct. 293, 89 L. Ed. 280. [3] 3 Cir., 143 F.2d 711. [4] 1 Cir., 152 F.2d 610, 612. [5] 7 Cir., 155 F.2d 882, 887. [6] 311 U.S. 579, 61 S. Ct. 331, 333, 85 L. Ed. 364. [7] Benitez v. Farran's Estate, 1 Cir., 143 F.2d 435. [8] Ross v. Drybrough, 2 Cir., 152 F.2d 427. [9] Civil Practice Act, § 562. [10] Miller v. United States, 7 Cir., 114 F.2d 267, 268. [11] 5 Cir., 104 F.2d 36.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1464389/	898 F. Supp. 744 (1995) Andre Brigham YOUNG, Petitioner, v. David WESTON, Superintendent of the Special Commitment Center, Respondent. No. C94-480C. United States District Court, W.D. Washington, at Seattle. August 25, 1995. 745 Robert Charles Boruchowitz, Seattle, WA, for petitioner. Sarah Sappington, Seattle, WA, for respondent. ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT COUGHENOUR, District Judge. This matter comes before the Court on cross-motions for summary judgment. This case was previously referred to Magistrate Judge Philip K. Sweigert, who heard oral argument March 24, 1995. Neither party requests further oral argument. Having reviewed the relevant pleadings, memoranda, affidavits, and other documents on file, and having reviewed the transcript of the oral argument, the Court now finds and concludes as follows: I. BACKGROUND Andre Brigham Young is currently incarcerated at the Special Commitment Center in Monroe, Washington, serving an indefinite term of involuntary commitment pursuant to Washington's sexually violent predator statute, Wash.Rev.Code § 71.09. He petitions the Court for a writ of habeas corpus, arguing that his confinement is unconstitutional 746 and that the statute is unconstitutional both facially and as applied. The parties have filed cross-motions for summary judgment on purely legal issues. Petitioner Young requests an evidentiary hearing in the event the issues of law are not resolved in his favor. Because the Court agrees with Young that the statute is unconstitutional on its face, an evidentiary hearing is unnecessary. Nor is it necessary to address the State's argument that one of Young's twenty-two claims, the claim that the cumulative effect of evidentiary errors in the trial court violated his right to a fair trial, has not been exhausted. II. THE SEXUALLY VIOLENT PREDATOR STATUTE The Community Protection Act of 1990 comprises fourteen separate sections addressing various issues related to violent crimes, particularly violent sex offenses.[1] Provisions of the Act increase the sentences for sex offenders, require community registration of sex offenders, and provide for compensation for victims, among other things. The Act also includes the Sexually Violent Predator statute, codified at Wash.Rev.Code § 71.09 (hereafter "Statute"). The Statute authorizes the indefinite commitment of defendants determined to be "sexually violent predators." In formulating the Statute, the Legislature was guided by the following findings: The legislature finds that a small but extremely dangerous group of sexually violent predators exist who do not have a mental disease or defect that renders them appropriate for the existing involuntary treatment act, chapter 71.05 RCW, which is intended to be a short-term civil commitment system that is primarily designed to provide short-term treatment of individuals with serious mental disorder and then return them to the community. In contrast to persons appropriate for civil commitment under chapter 71.05 RCW, sexually violent predators generally have antisocial personality features which are unamenable to existing mental illness treatment modalities and those features render them likely to engage in sexually violent behavior. The legislature further finds that sex offenders' likelihood of engaging in repeat acts of predatory sexual violence is high. The existing involuntary commitment act, chapter 71.05 RCW, is inadequate to address the risk to reoffend because during confinement these offenders do not have access to potential victims and therefore they will not engage in an overt act during confinement as required by the involuntary treatment act for continued confinement. The legislature further finds that the prognosis for curing sexually violent offenders is poor, the treatment needs of this population are very long term, and the treatment modalities for this population are very different than the traditional treatment modalities for people appropriate for commitment under the involuntary treatment act. Wash.Rev.Code § 71.09.010. A "sexually violent predator" is a person "who has been convicted of or charged with a crime of sexual violence and who suffers from a mental abnormality or personality disorder which makes the person likely to engage in predatory acts of sexual violence." Wash.Rev.Code § 71.09.020(1). "Sexually violent offenses" include not only rape, rape of a child, and child molestation, but also such 747 offenses as murder, assault, kidnapping, and burglary, when the offenses are determined to have been "sexually motivated." Wash. Rev.Code § 71.09.020(4). The Statute does not attempt to define the term "personality disorder." However, "mental abnormality" is defined as "a congenital or acquired condition affecting the emotional or volitional capacity which predisposes the person to the commission of criminal sexual acts in a degree constituting such person a menace to the health and safety of others." Wash.Rev.Code § 71.09.020(2). "Predatory" acts, for purposes of the Statute, are "acts directed towards strangers or individuals with whom a relationship has been established or promoted for the primary purpose of victimization." Wash.Rev.Code § 71.09.020(3). The Statute allows the State to initiate the involuntary commitment process when a person's sentence for a sexually violent offense is about to expire, or when a person who was incompetent to stand trial on a charge of a sexually violent offense or who was found not guilty by reason of insanity of a sexually violent offense is about to be released. Wash.Rev.Code § 71.09.030. To initiate the commitment process, the county prosecutor or the attorney general files a petition alleging that the person is a "sexually violent offender." Id. A judge determines whether there is probable cause to believe that the person is a sexually violent predator. Wash. Rev.Code § 71.09.030. If so, the judge directs that the person be taken into custody and transferred to a facility for evaluation "by a person deemed to be professionally qualified to conduct such an examination pursuant to rules developed by the department of social and health services." Id. A person charged under the statute is entitled to a trial within 45 days after the filing of the petition. Wash.Rev.Code § 71.09.050. The detainee has the right to retained or appointed counsel and the right to retained or appointed experts. Both parties have a right to a jury trial. Id. The Statute further provides that The court or jury shall determine whether, beyond a reasonable doubt, the person is a sexually violent predator.... If the court or jury determines that the person is a sexually violent predator, the person shall be committed to the custody of the department of social and health services in a secure facility for control, care and treatment until such time as the person' mental abnormality or personality disorder has so changed that the person is safe to be at large. Wash.Rev.Code 71.09.060(1). The Statute forbids detaining persons classified as sexually violent predators in state mental facilities or regional rehabilitation centers, "because these institutions are insufficiently secure for this population." Wash.Rev.Code § 71.09.060(3). Rather, the Statute allows confinement only in facilities located within correctional institutions. Id.; Wash.Rev. Code § 10.77.220. The Statute sets forth no particular requirements for treatment of the detainee, except that care and treatment must conform to "constitutional requirements." Wash.Rev. Code § 71.09.080. Once each year, the mental condition of a person committed under the Statute is evaluated. Wash.Rev.Code § 71.09.070. A report of this examination is provided to the court. Id. To obtain release, the detainee must petition the court. If it appears to the Secretary of the Department of Social and Health Services that "the person's mental abnormality or personality disorder has so changed that the person is not likely to commit predatory acts of sexual violence if released," then the Secretary authorizes the detainee to file a petition. Wash.Rev.Code § 71.090.90. The court must hold a hearing within 45 days. Id. At the hearing, the State bears the burden of proving beyond a reasonable doubt that the petitioner's mental condition "remains such that the petitioner is not safe to be at large and that if discharged is likely to engage in predatory acts of sexual violence." Id. The detainee may petition the court for release even if the Secretary has not authorized the petition. Wash.Rev.Code § 71.09.090(2). Once each year, the Secretary is required to provide the detainee written notice of his or her right to petition 748 without the Secretary's approval. Id. Such notice must be accompanied by a waiver of rights. If the detainee does not waive the right to petition, the court must hold a show cause hearing "to determine whether facts exist that warrant a hearing on whether the person's condition has so changed that he or she is safe to be at large." Id. Although the detainee has a right to counsel at the hearing, the detainee has no right to be present. Id. If the court concludes that there is probable cause, it must hold a hearing similar to the original commitment hearing, affording the detainee the right to appointed or retained counsel and experts, and affording both parties the right to a jury trial. Id. Other than these annual review procedures, the detainee has no right to a hearing on a petition for release "unless the petition contains facts upon which a court could find that the condition of the petitioner had so changed that a hearing was warranted." Wash.Rev.Code § 71.09.100. Absent such a showing, the court is required to summarily deny the petition. Id. III. PROCEDURAL HISTORY Andre Brigham Young was convicted of rape on three occasions over a period spanning some twenty-two years. On October 24, 1990, one day prior to his scheduled release from prison on a 1985 conviction, the State filed a petition under the Statute. Young was transferred to the Special Commitment Center at the reformatory in Monroe, Washington, and held until his trial in February, 1991. The jury concluded that Young was a sexually violent predator, and he was committed. He filed a personal restraint petition, which was denied. On direct appeal from the trial court, a divided Washington Supreme Court held that the Statute is not unconstitutional. In re Personal Restraint of Young, 122 Wash.2d 1, 857 P.2d 989 (1993). IV. ANALYSIS Young asserts that the Statute is unconstitutional on a variety of grounds. Of these, the Court focuses on three: the violation of the substantive due process component of the Fourteenth Amendment; the violation of the Ex Post Facto Clause of Article 1, Section 10 of the Constitution; and the violation of the Double Jeopardy Clause of the Fifth Amendment. A. Substantive Due Process The Due Process Clause protects persons from the deprivation of life, liberty, or property without due process of law. U.S. CONST. amend. V, XIV. The Due Process Clause protects individuals on both procedural and substantive levels. Substantive due process "prevents the government from engaging in conduct that `shocks the conscience,' Rochin v. California, 342 U.S. 165, 172, 72 S. Ct. 205, 209 [96 L. Ed. 183] (1952), or interferes with rights `implicit in the concept of ordered liberty,' Palko v. Connecticut, 302 U.S. 319, 325-26, 58 S. Ct. 149, 152 [82 L. Ed. 288] (1937)." United States v. Salerno, 481 U.S. 739, 747, 107 S. Ct. 2095, 2101, 95 L. Ed. 2d 697 (1987). This substantive component of the Due Process Clause "bars certain arbitrary, wrongful government actions `regardless of the fairness of the procedures used to implement them.'" Foucha v. Louisiana, 504 U.S. 71, 112 S. Ct. 1780, 1785, 118 L. Ed. 2d 437 (1992) (quoting Zinermon v. Burch, 494 U.S. 113, 125, 110 S. Ct. 975, 983, 108 L. Ed. 2d 100 (1990)). Infringement of a fundamental liberty interest must be narrowly tailored to serve a compelling state interest. Reno v. Flores, ___ U.S. ___, ___, 113 S. Ct. 1439, 1447, 123 L. Ed. 2d 1 (1993). At the heart of the liberty interests protected from arbitrary government actions is freedom from bodily restraint. Youngberg v. Romeo, 457 U.S. 307, 316, 102 S. Ct. 2452, 2458, 73 L. Ed. 2d 28 (1982). As incarceration of persons is the most common and one of the most feared instruments of state oppression and state indifference, we ought to acknowledge at the outset that freedom from this restraint is essential to the basic definition of liberty in the Fifth and Fourteenth Amendments of the Constitution. Foucha, 504 U.S. at 90, 112 S.Ct. at 1791 (KENNEDY, J., dissenting). For this reason, the Supreme Court has carefully circumscribed the instances in 749 which the state may, for non-punitive reasons, detain or incarcerate an individual. For example, in times of war or insurrection, the government may detain individuals whom it believes are dangerous. Moyer v. Peabody, 212 U.S. 78, 84-85, 29 S. Ct. 235, 236-37, 53 L. Ed. 410 (1909). And, under certain circumstances, individuals may be detained pending arraignment, trial, or deportation, on the grounds that such individuals are dangerous to the community, dangerous to witnesses, or that they present flight risks. See, e.g., Flores, ___ U.S. at ___, ___, 113 S.Ct. at 1447-1449 (approving regulatory detention of alien juveniles pending deportation); Salerno, 481 U.S. at 749, 107 S.Ct. at 2103 (approving pretrial detention of individuals found likely to be a danger to the community pursuant to the Bail Reform Act of 1984); Schall v. Martin, 467 U.S. 253, 104 S. Ct. 2403, 81 L. Ed. 2d 207 (1984) (approving post-arrest detention of juveniles found to present a continuing danger to the community); Gerstein v. Pugh, 420 U.S. 103, 95 S. Ct. 854, 43 L. Ed. 2d 54 (1975) (approving post-arrest detention of individual pending probable cause determination by a neutral magistrate); Carlson v. Landon, 342 U.S. 524, 537-42, 72 S. Ct. 525, 532-35, 96 L. Ed. 547 (1952) (finding no absolute barrier to detention of potentially dangerous resident aliens pending deportation). The Supreme Court has also held that the state has authority to protect the community from the dangerous tendencies of some individuals who are mentally ill. Addington v. Texas, 441 U.S. 418, 426, 99 S. Ct. 1804, 1809, 60 L. Ed. 2d 323 (1979); Jackson v. Indiana, 406 U.S. 715, 729-737, 92 S. Ct. 1845, 1854-1858, 32 L. Ed. 2d 435 (1972). Absent clear and convincing evidence of both mental illness and dangerousness, however, detention is impermissible. Foucha, 504 U.S. at 80, 112 S.Ct. at 1786; see also, Jones v. United States, 463 U.S. 354, 368, 103 S. Ct. 3043, 3052, 77 L. Ed. 2d 694 (1983); O'Connor v. Donaldson, 422 U.S. 563, 95 S. Ct. 2486, 45 L. Ed. 2d 396 (1975) (holding confinement of harmless mentally ill person is unconstitutional). The State does not argue that the Sexually Violent Predator Statute is comparable to the pretrial detention schemes set forth in Salerno. See Salerno, 481 U.S. at 749, 107 S.Ct. at 2102. Such an argument would, of course, fail: Salerno and its ancestors authorize pretrial detention of dangerous persons for stringently limited periods of time. See id., at 748, 107 S.Ct. at 2101; Foucha, 504 U.S. at 82, 112 S.Ct. at 1787; cf. Allen v. Illinois, 478 U.S. 364, 370, 106 S. Ct. 2988, 2992, 92 L. Ed. 2d 296 (1986) (noting, in the context of determining whether a proceeding is criminal or civil for purposes of the Self-Incrimination Clause, that detainee "may be released after the briefest time in confinement"). This is quite obviously not true of the Sexually Violent Predator Statute. Commitment pursuant to the Statute is indefinite. Indeed, given the State's open acknowledgement of the poor treatment prospects for detainees, prolonged incarceration is to be expected. The State argues, however, that the Statute passes constitutional muster as a traditional civil commitment scheme, such as that analyzed in Addington. This argument also fails. The essential component missing from the Sexually Violent Predator Statute is the requirement that the detainee be mentally ill. Like the scheme rejected in Foucha, the Statute here permits indefinite incarceration based on little more than a showing of potential future dangerousness. See Foucha, 504 U.S. at 82, 112 S.Ct. at 1787. The absence of a mental illness requirement is apparent both in the statutory language and in its legislative history. First, the legislature's findings expressly disavow the notion that the targeted group of persons are mentally ill. As explained in Wash.Rev. Code § 71.09.010, the target group is made up of individuals "who do not have a mental disease or defect that renders them appropriate for the existing involuntary treatment act." Unlike persons with serious mental disorders, the legislature concluded, sexual predators "have antisocial personality features which are unamenable to existing mental illness treatment modalities," and for which the prognosis of cure is poor. Id. The abandonment of a mental illness requirement is further revealed in the statutory definitions. As noted above, a "sexually 750 violent predator," for purposes of the Statute, is a person who, among other things, "suffers from a mental abnormality or personality disorder." Wash.Rev.Code § 71.09.020(1). Amicus, the Washington State Psychiatric Association, explains that the term "mental abnormality" has neither a clinically significant meaning nor a recognized diagnostic use among treatment professionals.[2] Even accepting the statutory definition of "a congenital or acquired condition affecting the emotional or volitional capacity which predisposes the person to the commission of criminal sexual acts in a degree constituting such person a menace to the health and safety of others," Wash.Rev.Code § 71.09.020(2), the term establishes an unacceptable tautology: a sexually violent predator suffers from a mental condition that predisposes him or her to commit acts of sexual violence. The concept of a "personality disorder" is similarly unenlightening. The term is undefined in the Statute. In the psychiatric lexicon, a personality disorder is characterized by maladaptive behavior. See Amicus Brief, Washington State Psychiatric Association, at 7; DSM-IV at 630. As Amicus notes, there are a wide range of personality disorders, none of which is peculiar to sex offenders. As with the concept of mental abnormality, the Statute's use of "personality disorder" evokes a circular definitional structure in which the only observed characteristic of the disorder is the predisposition to commit sex crimes. Whatever doubt might remain after reviewing the Statute itself is resolved by the legislative history. The Governor's Task Force on Community Protection, whose proposed bill was substantially similar to that enacted, plainly intended to craft legislation to permit the involuntary commitment of persons who are not mentally ill: Civil commitment under the involuntary treatment law allows indefinite commitment, but is quite restrictive in its definitions. Under current laws, sexually violent predators only qualify for civil detention when a mental illness or mental disorder is present. The Task Force examined the histories of some individual violent predators who had been judged not to have a mental illness or mental disorder and therefore were not detainable. Task Force on Community Protection, Final Report to Booth Gardner, Governor, State of Washington, II-21 (1989).[3] Thus, this is not an enactment designed to provide for the commitment of dangerous mentally ill or mentally disordered persons. Rather, the Statute targets persons with "antisocial personality features." Wash.Rev. Code § 71.09.010. As in Foucha, persons within the Statute's reach have "an antisocial personality, a condition that is not a mental disease and that is untreatable." Foucha, 504 U.S. at 75, 112 S.Ct. at 1782. But the mere presence of antisocial personality, or other personality disorder falling short of mental illness, is constitutionally insufficient to support indefinite confinement. As the Court explained in Foucha: [T]he State asserts that because Foucha once committed a criminal act and now has an antisocial personality that sometimes leads to aggressive conduct, a disorder for which there is no effective treatment, he 751 may be held indefinitely. This rationale would permit the State to hold indefinitely any other insanity acquittee not mentally ill who could be shown to have a personality disorder that may lead to criminal conduct. The same would be true of any convicted criminal, even though he has completed his prison term. It would also be only a step away from substituting confinements for dangerousness for our present system which, with only narrow exceptions and aside from permissible confinements for mental illness, incarcerates only those who are proved beyond reasonable doubt to have violated a criminal law. Foucha, at 82, 112 S.Ct. at 1787. The Court concludes that the Sexually Violent Predator Statute, allowing as it does the indefinite confinement of persons who are not mentally ill, violates the substantive protections of the Due Process Clause. Predictions of dangerousness alone are an insufficient basis to continue indefinitely the incarceration of offenders who have completed their prison terms. B. Ex Post Facto Article I of the United States Constitution provides that the states may not pass any ex post facto law. In interpreting the scope of the ex post facto prohibition, courts have long been guided by the words of Justice Chase in Calder v. Bull, 3 (U.S.) Dall. 386, 1 L. Ed. 648 (1798). See, e.g., Collins v. Youngblood, 497 U.S. 37, 45, 110 S. Ct. 2715, 2721, 111 L. Ed. 2d 30 (1990); Miller v. Florida, 482 U.S. 423, 428, 107 S. Ct. 2446, 2450, 96 L. Ed. 2d 351 (1987). Justice Chase explained his understanding of what fell within the scope of the prohibition: [1] Every law that makes an action done before the passing of the law, and which was innocent when done, criminal; and punishes such action. [2] Every law that aggravates a crime, or makes it greater than it was, when committed. [3] Every law that changes the punishment, and inflicts a greater punishment, than the law annexed to the crime, when committed. [4] Every law that alters the legal rules of evidence, and receives less, or different testimony, than the law required at the time of the commission of the offense, in order to convict the offender. Calder, 3 (U.S.) Dall. at 390 (emphasis omitted). The ex post facto prohibition ensures that legislative acts "give fair warning of their effect and permit individuals to rely on their meaning until explicitly changed." Weaver v. Graham, 450 U.S. 24, 28, 101 S. Ct. 960, 964, 67 L. Ed. 2d 17 (1981). In addition, the ban "restricts governmental power by restraining arbitrary and potentially vindictive legislation." Id. Two critical elements must be present for a criminal or penal law to be ex post facto: (1) "it must be retrospective, that is, it must apply to events occurring before its enactment," and (2) "it must disadvantage the offender affected by it." Weaver, at 28, 101 S.Ct. at 964. The debate here is not whether the Sexually Violent Predator Statute is retrospective or disadvantageous in its application to Young. Rather, the debate concerns whether the Statute is penal or criminal in nature. The parties cite no Supreme Court decision directly addressing the issue here: whether, for purposes of the ex post facto clause, a law is criminal or penal, as opposed to civil. The Court notes, at the outset, that by labeling the Statute "civil," the State "does not thereby immunize it from scrutiny" under the clause. See Collins, 497 U.S. at 45, 110 S.Ct. at 2721. "Subtle ex post facto violations are no more permissible than overt ones.... [T]he constitutional prohibition is addressed to laws, `whatever their form,' which make innocent acts criminal, alter the nature of the offense, or increase the punishment." Id. (quoting Beazell v. Ohio, 269 U.S. 167, 170, 46 S. Ct. 68, 68-69, 70 L. Ed. 216 (1925)). Where the legislature has indicated an intention to establish a civil scheme, the Court must consider whether that scheme is "so punitive either in purpose or effect as to negate that intention." United States v. Ward, 448 U.S. 242, 248, 100 S. Ct. 2636, 2641, 65 L. Ed. 2d 742 (1980). Only the clearest proof will suffice to establish the unconstitutionality of a statute on this ground. Id. 752 The Supreme Court has formulated a non-exclusive list of factors to consider in determining whether a statute is penal or regulatory in the context of the procedural safeguards of the Fifth and Sixth Amendments: Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishmentretribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry, and may often point in differing directions. Kennedy v. Mendoza-Martinez, 372 U.S. 144, 83 S. Ct. 554, 567, 9 L. Ed. 2d 644 (holding unconstitutionally punitive certain statutes that deprived individuals of citizenship without Fifth and Sixth Amendment protections); see also Allen, 478 U.S. 364, 106 S. Ct. 2988 (analyzing the issue of whether a commitment statute is civil or criminal for purposes of the Self-Incrimination Clause of the Fifth Amendment). These factors are equally relevant in considering whether the Sexually Violent Predator Statute is civil or criminal for purposes of the Ex Post Facto Clause. See Artway v. Attorney General, 876 F. Supp. 666, 689 (D.N.J.1995). The Court concludes that the Statute cannot be classified as civil, considering the relevant factors. First, there is no dispute that Statute subjects individuals to an affirmative restraint. The Statute entails a complete loss of freedom for an indefinite period of time. The potential length of this confinement, and the periodic opportunities for release, are also relevant considerations. In Allen, the Supreme Court held that Illinois' Sexually Dangerous Persons Act was civil, partly because, in addition to providing treatment, the Act "established a system under which committed persons may be released after the briefest time in confinement," and were free to "apply for release at any time." Allen, 478 U.S. at 370, 106 S.Ct. at 2992. The Illinois act provides for case reviews every six months. Here, however, a detainee's case is reviewed only once per year. And although the statute purports to allow a detainee to petition for release at any time, in fact a petition is subject to a full adversarial hearing only if (1) the Secretary of the Department of Social and Health Services authorizes the petition or (2) the detainee establishes probable cause that he is no longer dangerous. Further, unlike the Illinois act, Washington's Statute does not provide for conditional release of offenders who cannot be determined with certainty to be dangerous. The lack of conditional release provisions can be expected to result in longer terms of confinement. Second, the Statute applies to behavior that is already criminal. Indeed, it is expressly limited in its application to persons who have been convicted of a crime or who have been charged with a crime but found incompetent to stand trial or found not guilty by reason of insanity. Cf. Artway, 876 F.Supp. at 691. Third, the Statute, in its operation, will promote the traditional aims of punishmentretribution and deterrence. In Allen the Supreme Court determined that because Illinois had "disavowed any interest in punishment" and was focused solely on providing treatment to mentally disordered sex offenders, its commitment statute was civil, rather than criminal. Allen, 478 U.S. at 370, 106 S.Ct. at 2992. Central to the Illinois statutory scheme is the requirement that the State elect either punishment or treatment at the time the offender is charged. See Allen, at 373, 106 S.Ct. at 2994 ("the State serves its purpose of treating rather than punishing sexually dangerous persons"); People v. Patch, 9 Ill.App.3d 134, 293 N.E.2d 661, 665 (1972); People v. Allen, 107 Ill. 2d 91, 89 Ill. Dec. 847, 852, 481 N.E.2d 690, 695 (1985). In sharp contrast, Washington's Sexually Violent Predator Statute requires that the convicted sex offender serve his sentence prior to commitment; the State has no power to initiate proceedings under the Statute until the sentence of the convicted offender "is about to expire, or has expired." Wash.Rev. 753 Code § 71.09.030. The operation of the Statute is not materially different for persons who are charged with a sex offense but found incompetent to stand trial or found not guilty by reason of insanity. In both instances, the State may initiate proceedings under the Statute only when the person is about to be released or has been released. Id. Thus, despite the State's claims that the Statute is intended only to provide treatment, the State evinces a keen interest in punishment. It is immaterial, for purposes of this analysis, that the punishment aims are primarily expressed in other Washington laws, rather than being incorporated directly into the Statute. The Statute is inextricably linked to the traditional goals of punishment, because it requires, on its face, that the detainee serve his entire criminal sentence before being committed or treated. The punishment imperative also undermines the State's purported interest in treating violent sexual predators. The Statute forecloses the possibility that offenders will be evaluated and treated until after they have been punished. Of course, it defies reason to suggest that the mental abnormalities or personality disorders causing violent sexual predation surface only at the termination of a prison term. Common sense suggests that such mental conditions, if they are indeed the cause of sexual violence, are present at the time the offense is committed. Setting aside the question of whether a prison term exacerbates or minimizes the mental condition of a sex offender, it plainly delays the treatment that must constitutionally accompany commitment pursuant to the Statute. The failure of the Statute to provide for examination or treatment prior to the completion of the punishment phase strongly suggests that treatment is of secondary, rather than primary, concern. The Court concludes that, although there is clearly an alternative purpose to which the Statute may be connected and although indefinite commitment is not necessarily excessive in relation to that purpose, these factors are greatly outweighed by factors favoring the conclusion that the Statute is criminal. As noted above, there is no dispute that, as to Young, the Statute is retrospective and disadvantageous. Accordingly, it stands in violation of the ex post facto prohibition of the Constitution. C. Double Jeopardy "[T]he Double Jeopardy Clause protects against three distinct abuses: a second prosecution for the same offense after acquittal; a second prosecution for the same offense after conviction; and multiple punishments for the same offense." United States v. Halper, 490 U.S. 435, 440, 109 S. Ct. 1892, 1897, 104 L. Ed. 2d 487 (1989). The third of these abuses, multiple punishments, is at issue in this case. The Double Jeopardy Clause does not apply only to punishment imposed in criminal proceedings; rather, its violation "can be identified only by assessing the character of the actual sanctions imposed on the individual by the machinery of the state." Halper, at 446, 109 S.Ct. at 1901. In making this assessment, the labels "criminal" and "civil" are not of paramount importance. It is commonly understood that civil proceedings may advance punitive as well as remedial goals, and, conversely, that both punitive and remedial goals may be served by criminal penalties.... [T]he determination whether a given civil sanction constitutes punishment in the relevant sense requires a particularized assessment of the penalty imposed and the purposes that the penalty may fairly be said to serve. Simply put, a civil as well as a criminal sanction constitutes punishment when the sanction as applied in the individual case serves the goals of punishment.... From these premises, it follows that a civil sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes, is punishment, as we have come to understand the term. Id. at 447-48, 109 S.Ct. at 1901-02 (emphasis added and citations omitted). As explained above, in the Court's analysis of the Ex Post Facto Clause, the Statute at issue here serves the traditional aims of punishmentretribution and deterrence. 754 Cf. Halper, at 449, 109 S.Ct. at 1902. The analysis applies equally for purposes of the Double Jeopardy Clause. Having once been punished for the commission of a violent sexual offense, the offender is subject to further incarceration under the Statute's commitment scheme. The punishment imperative embodied in the statutory approach, in addition to the secondary nature of the treatment provisions, renders the Statute an unconstitutional second punishment. V. CONCLUSION The Court concludes that Washington's Sexually Violent Predator Statute, Wash. Rev.Code § 71.09, violates the substantive due process component of the Fourteenth Amendment, the Ex Post Facto Clause, and the Double Jeopardy Clause. The other issues raised in the petition for a writ of habeas corpus need not be addressed. The writ is GRANTED. In anticipation of appeal, the Court directs the parties to brief the issue of release pending appeal. Each party shall file a brief on this issue no later than September 5, 1995. The parties may file responsive briefs no later than September 7, 1995. The parties shall indicate whether oral argument is requested. SO ORDERED. NOTES [1] The Act was adopted by the Washington Legislature after several widely publicized acts of sexual violence provoked outrage among the public. In what is perhaps the most often cited incident, Earl Shriner, a man with a long history of violent sex offenses, assaulted and sexually mutilated a young boy. In response to this and other incidents, Governor Booth Gardner assembled the Task Force on Community Protection to evaluate and propose changes in the law. The task force found "gaps" in the existing system of determinate, but short, sentencing ranges and indefinite, but inapplicable, involuntary commitment laws. See Task Force on Community Protection, Final Report to Booth Gardner, Governor, State of Washington, II-5-6, II-21 (1989); see also, D. Boerner, Confronting Violence: In the Act and In the Word, 15 U. PUGET SOUND L.REV. 525 (1992). A detailed account of the role of the Task Force in propounding the legislation is unnecessary here. The history of the Sexually Violent Predator Statute and the prevailing climate in which it was adopted is analyzed in great detail in Predators and Politics: A Symposium on Washington's Sexually Violent Predators Statute, 15 U. PUGET SOUND L.REV. 507 (1992). [2] The choice of "mental abnormality," as opposed to "mental illness" or "mental disorder" appears to be deliberate. Washington's involuntary treatment statute, Wash.Rev.Code § 71.05 allows commitment of persons with "medical disorders," a syndrome or pattern well-recognized among the psychiatric community. American Psychiatric Association, Diagnostic and Statistical Manual, at xxiv (Fourth ed. 1994). The legislature's decision to employ a term unrecognized in the psychiatric community, coupled with its provision of a definition of no value to treatment professionals is an indication that the State did not intend the Statute to capture only the seriously mentally ill. [3] Indeed, in testimony before the legislature, one member of the Task Force explained that Washington's traditional civil commitment law, Wash. Rev.Code § 71.05, et seq., was inappropriate for Earl Shriner, the perpetrator of the highly publicized assault and mutilation of a young boy, because he was not mentally ill. SENATE LAW & JUSTICE COMMITTEE, Testimony of Professor David Boerner at 1 (Jan. 10, 1990). In describing Earl Shriner, Professor Boerner stated "Mr. Shriner is not mentally ill as that term is defined. He is clearly a problem, and clearly very dangerous, but he doesn't suffer from a classic mental illness."	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2796180/	In the United States Court of Appeals For the Seventh Circuit No. 13-3316 NATIONWIDE FREIGHT SYSTEMS, INC., et al., Plaintiffs-Appellants, v. ILLINOIS COMMERCE COMMISSION, et al., Defendants-Appellees. Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 2486— James F. Holderman, Judge. ARGUED DECEMBER 12, 2014 — DECIDED APRIL 23, 2015 Before ROVNER, WILLIAMS, and TINDER, Circuit Judges. ROVNER, Circuit Judge. The appellants in this case are three motor carriers that were cited for engaging in intrastate operations in Illinois without a license from the Illinois Commerce Commission (the “ICC” or “Commission”). When the ICC conducted a follow-up investigation of the carriers and 2 No. 13-3316 requested documents relating to their operations in Illinois, the carriers refused to comply, reasoning that because the docu- ments sought by the ICC would reveal their rates, routes, and services, the requests were “related to” those rates, routes, and services and therefore were preempted by the Federal Aviation Administration Authorization Act of 1994 (the “FAAAA”), 49 U.S.C. § 14501(c). The ICC rejected the carriers’ argument and fined them for their failure to comply with the document requests, prompting the carriers to file suit seeking a judgment declaring the ICC’s enforcement efforts preempted. The district court granted summary judgment to the ICC, concluding that the document requests, although they might reveal the carriers’ rates, routes, and services, had no significant economic impact on them. Alternatively, the court found that the ICC’s efforts to enforce its licensing requirement, which serves as a means of verifying a carrier’s insurance coverage, is exempted from federal preemption. Nationwide Freight Sys., Inc. v. Baudino, No. 12 C 2486, 2013 WL 5346450 (N.D. Ill. Sep. 23, 2013). We agree on both points and affirm. I. Since 1953, Illinois has prohibited motor carriers of prop- erty from conducting intrastate operations without first procuring a license from the ICC. See 1953 Ill. Laws 933, 937-38; 625 ILCS 5/18c-4104(1)(a). Section 4104 of the Illinois Commer- cial Transportation Law currently deems it unlawful to “[o]perate as an intrastate motor carrier of property without a license from the Commission; or as an interstate motor carrier of property without a registration from the Commission.” 625 ILCS 5/18c-4104(1)(a). Obtaining a license for intrastate operations in turn requires a carrier to carry appropriate No. 13-3316 3 insurance or surety coverage. 625 ILCS 5/18c-4901 & 4402(2)(b). Procedurally, a carrier complies with the licensing requirement by completing an application and submitting proof of its insurance or bond coverage along with an administrative fee. See id.; 92 Ill. Admin. Code § 1301.30(a). A carrier is then issued a public carrier certificate which states, inter alia, that “[t]he holder of this license certifies to the Commission that it will perform transportation activities only with the lawful amount of liability insurance in accordance with 92 Ill. Admin. Code 1425.” R. 49 at 11. See also Ill. Admin. Code § 1425.10 (“A license or registration issued by the [ICC] to a motor carrier of property has force and effect only while the carrier is in compliance with requirements for the filing of proof of insurance or bond coverage.”). Drivers must have a copy of the carrier’s license with them at all times. See 625 ILCS 5/18c- 4104(c). It is a Class C misdemeanor offense, punishable by imprisonment for up to 30 days and a fine of up to $1,500, for an operator not to produce proof of registration upon request (id.; 625 ILCS 5/18c-1704(1); 730 ILCS 5/5-4.5-65); and the ICC also has the authority to impose a civil penalty of between $100 and $1,000 per offense (625 ILCS 5/18c-1704(2)). Each day of continuous operation in violation of the licensing requirement constitutes a separate offense. 625 ILCS 5/18-1701. Each of the three appellants is a motor carrier engaged in the intrastate transportation of property in Illinois that was cited by the ICC police force for conducting such activity without a license. Nationwide Freight Systems, Inc. and Stott Contracting, Inc. were cited in May of 2010 and were each fined $750. Leader U.S. Messenger, Inc., which previously had obtained a license but had allowed it to lapse, was cited in 4 No. 13-3316 March of 2011 and was subjected to a civil penalty of $200.1 After those penalties were paid, the ICC opened investigations into each carrier in order to determine the extent to which the operator may have committed additional violations by conducting unlicensed, intrastate operations for hire prior to the occasion on which the operator was cited. Toward that end, each carrier was asked to produce, for a period of five or six months preceding the violation, documents (including, but not limited to, bills of lading,2 driver logs, and invoices from any owner/operators leased to the carrier) that would show the dates of transport, a description of the cargo carried, the origin and destination of that cargo, and the revenues generated from the transportation provided. The authorization for these requests is supplied by section 1703 of the Illinois Commercial Transportation Law: “Authorized employees of the Commis- sion shall have the power at any and all times to examine, audit, or demand production of all accounts, books, memo- randa, and other papers in the possession or control of a license or registration holder, its employees, or agents.” 625 ILCS 5/18c-1703(2)(b).3 All three carriers refused to comply with the 1 Of the three appellants, only Nationwide thereafter corrected the deficiency for which it was cited by obtaining a license. 2 Bills of lading typically both acknowledge the receipt of goods by the carrier for shipment and recite the terms of the parties’ agreement. See Ill. Match Co. v. Chicago, R.I. & P. Ry. Co., 95 N.E. 492, 493-94 (Ill. 1911); Marx Transp., Inc. v. Air Exp. Int’l Corp., 882 N.E.2d 1281, 1286-87 (Ill. App. Ct. 2008); BLACK’S LAW DICTIONARY 198-99 (10th ed. 2014). 3 There is no dispute here that the Commission’s power extends to motor (continued...) No. 13-3316 5 ICC’s demand for such documents and were issued adminis- trative citations for their refusals. See 625 ILCS 5/18c-4401(k). The carriers filed motions to dismiss these citations with the ICC. They argued that the document requests were preempted by the FAAAA because they sought records that would reveal the rates, routes, or service of each carrier. “To the extent that the commerce commission’s minions are asking for informa- tion about such things as bills of lading, owner-operator contracts, and any other documents concerning the origins or destinations of cargo, they are running afoul of clearly-stated federal law,” they argued. “Their conduct should be barred and sanctioned.” See R. 1-1 at 6-7 (Stott); R. 44-4 at 5-6 (Nation- wide). The enactment of the FAAAA extended the 1978 preemp- tion of state regulation of air carriers to motor carriers. Pursu- ant to the FAAAA’s preemption provision, neither a state nor its political subdivision may enact or enforce laws “related to a price, route, or service of any motor carrier … with respect to the transportation of property. 49 U.S.C. § 14501(c)(1) (empha- sis ours). The provision also contains a number of exceptions. As relevant here, the act specifies that the preemption provi- sion does not displace “the authority of a State to regulate motor carriers with regard to minimum amounts of financial 3 (...continued) carriers of property that should be, but are not, licensed to conduct operations in Illinois. We note that the Commission also has the power under section 1703 to subpoena information from persons other than license holders in furtherance of its inquiry into potential violations. See § 18c- 1703(2)(b). 6 No. 13-3316 responsibility relating to insurance requirements or self- insurance authorization.” § 14501(c)(2)(A). The ICC’s chief administrative law judge (“ALJ”), Latrice Kirkland-Montague, denied the carriers’ motions to dismiss, found each in violation of its obligation to comply with the Commission’s document requests, and ordered each of them to pay fines of $500 for the failure to comply. The carriers filed a consolidated petition for rehearing with the ICC, and Judge Kirkland-Montague issued a memorandum to the ICC’s commissioners explaining why, in her view, the petition should be denied. First, the carriers had made no showing that the document requests might have anything more than an indirect, remote, or tenuous effect on their rates, routes, or services. The Commission had only asked the carriers to produce records already in their possession. Second, the statute exempts from preemption the state’s power to regulate carriers with respect to minimum insurance requirements. Without the ability to demand the types of records that the ICC had sought from the carriers, Kirkland-Montague asserted, the state would be unable to ascertain whether a carrier was or is operating without a license or without the insurance coverage necessary to obtain a license. R. 44-3 at 45-46. The Commission denied the carriers’ petition for rehearing. The carriers turned to federal court, where they filed suit against the ICC and three of its officers and agents in their official capacities. (The ICC was dismissed from the suit on Eleventh Amendment grounds, and that decision is not challenged here.) The carriers sought a declaratory judgment deeming the ICC’s document requests and its investigations preempted by the FAAAA to the extent they implicated the No. 13-3316 7 carriers’ rates, routes, or services. “The fact is,” the carriers alleged, “that the Interstate Commerce Commission is attempt- ing to regulate—by investigating—a motor carrier’s rates, routes, or services for purposes which are preempted by 49 U.S.C. § 14501. That it cannot do.” R. 1 at 7 ¶ 27. They also sought an injunction barring the ICC from assessing penalties for their refusal to comply with the document requests and from making any further inquiry into any aspect of their operations other than their compliance with the ICC’s insur- ance requirements or demonstrated safety issues. The parties filed cross-motions for summary judgment. In connection with those motions, acting ICC police chief Craig Baner submitted a declaration in which he represented that the ICC typically opens an investigation when a commercial motor carrier is discovered to be operating without a public carrier certificate. The purpose of that investigation is to determine how long the carrier has been conducting operations without such a certificate in the time period preceding that violation, and also to determine whether the carrier had the requisite insurance coverage (and had proof of such coverage on file with the ICC) during that same time period. In seeking a carrier’s business records, Baner averred, the ICC has no interest in regulating a carrier’s prices, routes, or services. Its sole purpose in seeking the types of documents demanded of the carriers in this case is to enforce the certification and insurance requirements imposed on the carriers by Illinois law, and to determine the nature of any additional penalties the ICC may impose on the carrier for violations of those requirements. R 44-9 at 3 ¶¶ 3-5. For their part, the plaintiff carriers were somewhat vague as to how the document requests might affect 8 No. 13-3316 their rates, routes, or services. They suggested that the practical result of the ICC’s investigation might be to require a carrier and its customers to prepare particular forms responsive to the ICC’s demands for information and thereby incur additional costs or, alternatively, face additional penalties if they did not. R. 42 at 5. The district court granted summary judgment in the ICC’s favor. To the extent that the document requests could be construed “[a]t a broad level” to relate to a carrier’s rates, routes, or services in the sense of having some connection with them, 2013 WL 5346450, at 6, this alone was insufficient to trigger preemption, the court reasoned. Rather, the challenged conduct must “have ‘a significant impact on carrier rates, routes, or services’” to be preempted. Id., at 7 (quoting Rowe v. New Hampshire Motor Transp. Ass’n, 552 U.S. 364, 375, 128 S. Ct. 989, 997 (2008) (emphasis in Rowe)). The court had been presented with no evidence that the document requests affected the plaintiffs’ rates, routes, or services in any way, and the plaintiffs did not claim that they did. Id. The carriers could do no more than speculate that the ICC’s document requests might force them to create new forms in order to supply the sort of information that the ICC demanded; but that specula- tion was not supported by the record. Id. Consequently, the carriers had no basis for claiming that the ICC’s effort to obtain the challenged documents from the plaintiffs was preempted. Alternatively, the ICC’s pursuit of documents was covered by the statutory exemption for activities aimed at enforcing carrier financial responsibility. Id., at 8. Baner’s declaration indicated that the ICC sought the documents in order to No. 13-3316 9 determine how long each carrier had been operating without the requisite certificate, whether the carrier had the requisite insurance coverage during that time, and, if so, whether the carrier had proof of its coverage on file with the ICC during that time. There was no indication that Baner’s explanation for the document requests was false. Id. The carriers’ argument that the document requests were not, in fact, focused on insurance or safety issues was unpersuasive in light of the information actually sought by the request—including the origin, nature, and destination of cargo transported, the dates of transportation, and so forth—and Baner’s explanation that this information was sought in order to ascertain how long the carriers may have been operating without a license and, in turn, the requisite insurance. “As a matter of common sense, this type of information is relevant to ascertaining whether a motor carrier is properly licensed and insured.” Id. II. We are presented on appeal with essentially the same two issues presented to the district court. First, we must consider whether the ICC’s investigation “relate[s] to” the plaintiff carriers’ rates, routes, and services, and is therefore preempted by the FAAAA, because the Commission has demanded documents which will disclose those rates, routes, and services, absent any additional indication that the Commission’s investigation will have a significant economic impact on the carriers’ rates, routes, and services. Second, we must consider whether the Commission’s document requests fall within the FAAAA’s exception for state insurance requirements, given that the requests are not confined to documents reflecting whether and when the carriers were insured and had proof of 10 No. 13-3316 their insurance on file with the ICC. We review the district court’s resolution of these issues on summary judgment de novo. E.g., Hotel 71 Mezz Lender LLC v. Nat’l Retirement Fund, 778 F.3d 593, 601 (7th Cir. 2015); see also Mass. Delivery Ass’n v. Coakley, 769 F.3d 11, 17 (1st Cir. 2014) (“Since federal preemp- tion is a question of statutory construction, we review these issues de novo.”). A. Connection Between the ICC’s Document Requests and the Carriers’ Rates, Routes, and Services The plaintiff carriers contend that the FAAAA bars an investigation into the operations of a motor carrier whenever that investigation, however incidentally, touches upon a carrier’s rates, routes, or services with respect to the transpor- tation of property. In the exercise of its audit authority, the ICC has sought documents which will disclose a carrier’s rates, routes, and services with respect to the transportation of property; and to that extent, the ICC’s investigation arguably “relates to” those rates, routes, and services, as the district court acknowledged. 2013 WL 5346450, at 6. This, in the carriers’ view, is enough to demonstrate that the Commission’s investigation (including, in particular, the document requests) is preempted, notwithstanding the ICC’s unchallenged representation that it seeks these documents solely for pur- poses of determining how long each carrier may have been operating without the requisite license (and potentially without the insurance coverage needed to obtain such a license) and determining appropriate penalties, and not with any intent to regulate a carrier’s rates, routes, or services. They argue: No. 13-3316 11 When coupled with the Illinois Commerce Commis- sion’s demands for transportation-related docu- ments, the admission by the commission that it was seeking information about how long the motor carriers were operating (that is, providing services) without licenses is as clear an indication as any that the commission was investigating the rates, routes and services of motor carriers. Appellants’ Br. 16. This is an exceedingly broad view of preemption principles that finds no support in case law. The Supremacy Clause of the Constitution establishes a rule of decision precluding courts from “giv[ing] effect to state laws that conflict with federal laws.” Armstrong v. Exceptional Child Ctr., Inc., 2015 WL 1419423, at 3 (U.S. Mar. 31, 2015); see U.S. Const. Art. VI, cl. 2. Of the three recognized types of preemp- tion, see, e.g., Wigod v. Wells Fargo Bank, N.A, 673 F.3d 547, 576 (7th Cir. 2012), it is express preemption that is at issue in this case, as the FAAAA states explicitly what states may and may not do with respect to motor carriers of property. Our inquiry into whether the FAAAA preempts the ICC’s investigation and document requests consequently begins with the language of the statute, “which necessarily contains the best evidence of Congress’ pre-emptive intent.” Dan’s City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769, 1778 (2013) (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 113 S. Ct. 1732, 1737 (1993)). Congress enacted the FAAAA’s preemption provision in 1994 with the aim of eliminating the patchwork of state regulation of motor carriers that persisted fourteen years after it had first attempted to deregulate the trucking industry. See 12 No. 13-3316 Dan’s City, 133 S. Ct. at 1775 (citing City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 440, 122 S. Ct. 2226, 2236 (2002)); S.C. Johnson & Son, Inc. v. Transp. Corp. of Am., Inc., 697 F.3d 544, 548-49 (7th Cir. 2012). Borrowing language from the 1978 legislation deregulating the airline industry, see Dan’s City, 133 S. Ct. at 1775, Congress precluded any state or its political subdivision from “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any private motor carrier … with respect to the transportation of property.” 42 U.S.C. § 14501(c)(1). Thus, as is typical in preemption cases, this appeal focuses on whether the Commission’s attempt to enforce the Illinois licensing requirement reasonably can be said to “relate[ ] to” the plaintiff motor carriers’ rates, routes, or services. See, e.g., Dan’s City, 133 S. Ct. at 1778; S.C. Johnson, 697 F.3d at 549. “The ordinary meaning of these words is a broad one—‘to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with,’—and the words thus express a broad pre-emptive purpose.” Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S. Ct. 2031, 2037 (1992) (citation omitted); see also Dan’s City, 133 S. Ct. at 1778; Rowe v. New Hampshire Motor Transp. Ass’n, 552 U.S. 364, 370, 128 S. Ct. 989, 994-95 (2008). The universe of state regulatory efforts preempted by the FAAAA thus includes laws or actions having some type of connection with or reference to a carrier’s rates, routes, or services, whether direct or indirect. Dan’s City, 133 S. Ct. at 1778 (citing Rowe, 552 U.S. at 370, 128 S. Ct. at 995); see also Morales, 504 U.S. at 384, 112 S. Ct. at 2037). But “the sky is [not] the limit.” Dan’s City, 133 S. Ct. at 1778. A state’s No. 13-3316 13 regulatory action is not preempted where its relationship with carrier rates, routes, or services is “tenuous, remote, or peripheral.” Id. (citing Rowe, 552 U.S. at 371, 128 S. Ct. at 995); see also Morales, 504 U.S. at 390, 112 S. Ct. at 2040). Rather, state action must have a substantial economic effect on carrier rates, routes, or services in order to be subject to preemption. Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1431 (7th Cir. 1996); see also Rowe, 552 U.S. at 375, 128 S. Ct. at 997 (“we have written that the state laws whose ‘effect’ is ‘forbidden’ under federal law are those with a ‘significant impact’ on carrier rates, routes, or services”) (quoting Morales, 504 U.S. at 388, 390, 112 S. Ct. at 2039, 2040) (emphasis in Rowe). We have thus articulated two requirements for preemption. First, a state must have enacted or attempted to enforce a law. Second, that law must relate to carrier rates, routes, or services “either by expressly referring to them, or by having a signifi- cant economic effect on them.” Travel All Over the World, 73 F.3d at 1432 (citing American Airlines, Inc. v. Wolens, 513 U.S. 219, 228-29, 115 S. Ct. 817, 823-24 (1995)); S.C. Johnson, 697 F.3d at 553; see Morales, 504 U.S. at 388, 112 S. Ct. at 2039; see also, e.g., Mass. Delivery Ass’n, 769 F.3d at 17-18; Parise v. Delta Airlines, Inc., 141 F.3d 1463, 1465-66 (11th Cir. 1998). Without doubt, the state’s regulatory efforts satisfy the first of these two criteria. The licensing requirement imposed by section 4104 of the Illinois Commercial Transportation Law, which the ICC was attempting to enforce by way of the document request promulgated pursuant to section 1703 of the statute, applies to motor carriers of property. But does the Commission’s enforcement effort meaningfully “relate to” 14 No. 13-3316 carrier rates, routes, or services? We agree with the district court that it does not, as the economic impact of the document requests on rates, routes, or services is, if anything, insignifi- cant. The Illinois statute does not expressly refer to rates, routes, or services, nor does it betray an effort to regulate their operations in any way. It simply imposes a licensing require- ment on all motor carriers transporting property within the state and subjects a carrier to penalties for failure to comply with that requirement. Nor, for that matter, do the challenged document requests expressly refer to rates, routes, or services. It is undisputed that the aim of those requests was to obtain documents that would establish how many times the plaintiff carriers had conducted unlicensed–and potentially uninsured–operations during the time period preceding their citations for operating without the required certificate. The only sense in which the requests implicate rates, routes, or services is that the business records sought (for example, invoices) will necessarily disclose infor- mation about the transportation services that a carrier has provided to its customer and the prices charged for those services. It is by no means unusual for one type of record to disclose a variety of information; for that matter, one piece of data can be informative and relevant in any number of ways. Documents which illuminate how many times a carrier engaged in unlicensed operations, how many miles of Illinois roads it used in those operations, and so forth will necessarily touch upon and overlap with the carrier’s rates, routes, and services, yes, but the Commission was not interested in the plaintiffs’ rates, routes, and services as such. No. 13-3316 15 The district court accepted the notion that the document requests could be said to relate to the carriers’ rates, routes, and services in the limited sense that they call for production of records that will disclose their prices, routes, and services. But in the absence of evidence that the ICC’s investigation would have any meaningful impact on the carriers’ rates, routes, or services, the court concluded that Travel All Over the World’s second criterion—that the enforcement effort have a significant economic effect on rates, routes, or services—had not been met. Indeed, the carriers have never been able to demonstrate how the ICC’s document requests might meaningfully affect their rates, routes, or services. As below, they can only specu- late that the need to document their compliance with the ICC’s registration and insurance requirements might compel the carriers and their customers to generate extra paperwork and thereby increase costs by some indefinite amount. But the ICC has not demanded that the carriers create any particular type of form; the Commission has asked the carriers to produce the types of documents that one would expect to be found among any motor carriers’ existing business records. The notion that compliance with the document requests would require the carriers to modify and expand their record-keeping is pure speculation, and is certainly insufficient to demonstrate a significant economic impact on the carriers’ operations.4 4 At points in their briefs and arguments to this court, the carriers have suggested that the test for preemption is whether the challenged state action relates to or has a significant impact on carrier rates, routes and services. See (continued...) 16 No. 13-3316 The carriers are thus left with the contention that any nexus between the challenged state action and their rates, routes, and services–including investigatory actions which would result in the disclosure of their rates, routes, and services– is sufficient to trigger preemption, however minimal the connection might be, and that our own decision in Travel All Over the World erred in requiring a showing of a significant economic impact. But the Supreme Court has never indicated that a de minimis impact on rates, routes, or services suffices for purposes of preemption, and we believe Travel All Over the World is in fact consistent with the high Court’s cases on this point. The Supreme Court’s preemption precedents are clear that not any relationship between state law and carrier rates, routes, and services, no matter how insignificant, will necessarily result in preemption. The cases do acknowledge that a state statute or effort to enforce that statute need not expressly cite 4 (...continued) Reply Br. at 4; Oral Argument at 4:29 (“There’s two prongs to this statute: to relate to, or to have an effect on.”). Actually, “related to” is the single, broad statutory standard, which this court (among others) has deemed to preclude a state from enacting or enforcing a law that: (1) expressly references rates, routes, and services, or (2) has a significant economic impact on rates, routes, and services. See Travel All Over the World, 73 F.3d at 1432; see also Morales, 504 U.S. at 388, 112 S. Ct. at 2039; Mass. Delivery Ass’n, 769 F.3d at 17-18. The carriers seem to be attempting to create a third category of preempted state laws or enforcement actions which implicitly reference, without significantly affecting, rates, routes, or services. Our cases do not recognize such a third category. Moreover, as we explain below, neither the Supreme Court’s jurisprudence nor our own support the notion that an implicit reference to or connection with carrier rates, routes, or services is alone sufficient to trigger preemption. No. 13-3316 17 a carrier’s rates, routes, or services, and that state regulatory action may be preempted as long as it affects a carrier’s rates, routes, and services, even if the effect is indirect. E.g., Dan’s City, 133 S. Ct. at 1778; Rowe, 552 U.S. at 370-71, 128 S. Ct. at 995; Morales, 504 U.S. at 386, 112 S. Ct. at 2038. Even so, Dan’s City observes that, notwithstanding the broad preemptive reach of the FAAAA’s “related to” clause, “the sky is [not] the limit,” and a “tenuous, remote, or peripheral” impact will not trigger preemption. 133 S. Ct. at 1778. The plain import of this qualifying language is that the challenged statute or regulatory action must have a meaningful impact in order to be pre- empted. To be fair, the Supreme Court has not yet had occa- sion to identify precisely what types of effects will be too insignificant to trigger preemption, because the cases that the Court has decided under the airline and motor carrier preemp- tion statutes have not been close to the line, wherever that line may be. See S.C. Johnson, 697 F.3d at 552 (citing Rowe, 552 U.S. at 371, 128 S. Ct. at 995). But whatever room this may leave for the plaintiff carriers to argue that the mere disclosure of their rates, routes, and services is enough of an effect to trigger preemption of the ICC’s document requests, Travel All Over the World all but closes the door on such a contention. Travel All Over the World draws the line to exclude from preemption actions which may have some nominal, incidental connection with carrier rates, routes, or services but do not have a mean- ingful economic impact on them. 73 F.3d at 1432. We can find nothing in the Supreme Court’s cases that is inconsistent with our holding on that point. Indeed, we cannot help but wonder why the Court would continue to caution that a “tenuous, remote, or peripheral” relationship between state regulation 18 No. 13-3316 and a carrier’s rates, routes, or services does not trigger preemption if it did not mean to imply exactly what our decision in Travel All Over the World recognizes: that the challenged state action must have a discernible and substantial impact on a carrier’s rates, routes, or services in order to be deemed preempted. Rowe itself states that “the state laws whose ‘effect’ is ‘forbidden’ are those with a ‘significant impact’ on carrier rates, routes, or services.” 552 U.S. at 375, 128 S. Ct. at 997 (quoting Morales, 504 U.S. at 388, 390, 112 S. Ct. at 2039, 2040) (emphasis in Rowe); see also, e.g., Mass. Delivery Ass’n, 769 F.3d at 18 (“[C]ountless state laws have some relation to the operations of [motor carriers] and thus some potential effect on the prices charged or services provided. State laws whose effect is only tenuous, remote, or peripheral are not pre- empted.”) (internal quotation marks and citations omitted) (emphasis in original). And we are confident that wherever the Supreme Court may ultimately draw the line between pre- empted and non-preempted effects, this case falls on the non- preempted side of the line. All that the carriers have shown, in the end, is that the Commission’s document requests will require them, inciden- tally, to disclose information regarding their rates, routes, and services, not that the aim or the result of the investigation will be to affect those aspects of their operations. The carriers’ speculation concerning extra paperwork at best suggests a de minimis (potential) economic effect on their operations in the form of unspecified paperwork. And despite the carriers’ insinuation that if the ICC is requesting documents that will reveal their rates, routes, and services, the Commission must have an agenda to influence those aspects of their operations, No. 13-3316 19 there is no indication that the Commission is interested in their rates, routes, or services as such, let alone that it intends to (or necessarily will) regulate or otherwise affect them. We confronted a similar line of argument when S.C. Johnson & Son sued motor carriers that had allegedly bribed the company’s transportation director to contract with them to provide transportation services to the company. S.C. Johnson had alleged, among other things, that the bribery had injured it by increasing the company’s transportation costs—i.e., the price it had paid to the carriers for their services. The carriers cited this allegation as “the smoking gun that proves that S.C. Johnson’s claims are ‘really’ just about rates and services.” 697 F.3d at 559. We rejected the argument as to S.C. Johnson’s bribery and racketeering claims, reasoning that although the injury that S.C. Johnson experienced as a result of the defen- dants’ alleged criminal acts might have some relation to the carriers’ rates or services, the relationship was too tangential to warrant preemption. Id. at 560. Our decision in that case makes clear that simply because a carrier can show some link between the state action it challenges and its rates, routes, or services does not invariably mean that the challenged action is pre- empted as one “related to” those rates, routes, or services. The nexus must be significant, and in this case the carriers have no evidence to show that it is. Finally, it should be noted that the records the ICC has asked the carriers to produce are of a type that might be sought in any number of civil and criminal settings. A customer suing a motor carrier for theft, for example, might ask for these same records, perhaps to establish a pattern of wrongdoing (and other potential victims), to identify the errant driver responsi- 20 No. 13-3316 ble for the theft(s), or to trace the path the victim’s property took after it was stolen. The state itself might seek to subpoena such records, and for similar purposes, in the course of investigating potential criminal charges of theft, bribery, racketeering, or tax evasion in connection with a carrier’s operations. To say that the ICC’s requests are preempted simply because the documents they seek will disclose the carriers’ rates, routes, and services would call into question any number of legitimate requests for a motor carrier’s business records, even when those records are being sought for pur- poses entirely unrelated to the deregulatory purposes of the FAAAA. Motor carriers, as members of the public, see S.C. Johnson, 697 F.3d at 558 (citing Rowe, 552 U.S. at 375, 128 S. Ct. at 997), remain subject to the civil and criminal constraints that “set basic rules for a civil society,” id. at 558. But, as a practical matter, those rules would be unenforceable against motor carriers if such carriers were deemed exempt even from routine investigatory efforts that would result in incidental disclosures of their rates, routes, or services, not- withstanding the absence of any purpose to interfere with the competitive forces of the free market. This is the unmistakable import of the carriers’ reply brief, which flatly argues that any effort to document and fine a carrier based on the number of days it has conducted unlicensed operations is preempted by the FAAAA. Reply Br. at 6. B. Safety and Insurance Exception Even if it could be said that the ICC’s investigation mean- ingfully relates to the carriers’ rates, routes and services, the district court correctly determined that the Commission’s enforcement actions fall within the exception to preemption set No. 13-3316 21 forth in the insurance provision of the FAAAA. The statute provides that the general rule of preemption set forth in section 14501(c)(1) “shall not restrict the safety regulatory authority of a State with respect to motor vehicles … or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.” § 14501(c)(2)(A). As the district court recognized, “[t]his exception preserves ‘the preexisting and traditional state police power over safety,’ and state laws that are ‘genuinely respon- sive to safety [or insurance] concerns’ are included within the exception.” 2013 WL 5346450, at 8 (quoting Ours Garage, 536 U.S. at 439, 442, 122 S. Ct. S. Ct. at 2236, 2237). Because it is fair to say that the ICC’s investigation was aimed at enforcing Illinois’ requirement that carriers maintain specified insurance coverage, the Commission’s investigation is covered by this exception.5 It is undisputed that the one substantive requirement that a motor carrier must satisfy in order to obtain the requisite 5 The carriers devote significant attention in their briefs to contesting the notion that the ICC’s investigation was motivated by safety concerns. Among other things, they point out that the ICC’s former responsibilities for conducting safety inspections of the vehicles used by motor carriers have been transferred to the Illinois Department of Transportation. See 20 ILCS 2705/2705-125. But setting safety concerns aside, there nonetheless remains the express exemption for regulation of “motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements.” § 14501(c)(2)(A); see Cal. Tow Truck Ass’n v. City & Cnty. of San Francisco, 693 F.3d 847, 857-58 (9th Cir. 2012) (identifying these as separate exceptions). It is this statutory exception on which the ICC relies, and on which we shall focus our attention. 22 No. 13-3316 license from the ICC is to show that it has appropriate insur- ance or bond coverage; beyond that, it is simply a matter of completing paperwork and submitting a fee.6 Requiring a license is thus a means of confirming that motor carriers are properly insured. Indeed, as we noted earlier, the public carrier certificate issued to an intrastate motor carrier memorializes the license holder’s certification “that it will perform transpor- tation activities only with the lawful amount of liability insurance in accordance with 92 Ill. Admin. Code 1425.” R. 49 at 11. And penalizing a carrier for conducting unlicensed operations (and conducting an investigation to determine the extent of such operations for purposes of determining the appropriate penalty) likewise furthers the insurance require- ment. Thus, the ICC’s investigation fits comfortably within section 14501(2)(A)’s exception for imposing and enforcing insurance requirements vis-à-vis commercial motor carriers of property. Cf. Ace Auto Body & Towing, Ltd. v. City of New York, 171 F.3d 765, 776 (2d Cir. 1999) (remarking, with respect to municipal regulations as to “licensing, display of information, reporting, record-keeping, criminal history, insurance, posting of bond, and maintenance of storage and repair facilities” of tow-truck operators: “Most of these requirements are so directly related to safety or financial responsibility and impose so peripheral and incidental an economic burden that no detailed analysis is necessary to conclude that they fall within the § 14501(c)(2)(A) exemptions.”). 6 The minimum amounts and types of insurance coverage are specified by the Illinois Administrative Code. See 92 Ill. Admin. Code §§ 1425.30- 1425.50; see also id. § 1425.120 (specifying minimum net worth requirements for carrier to qualify for self-insurance). No. 13-3316 23 The carriers suggest that if the Commission were truly interested in insurance, it would simply ask the carriers about their coverage and leave it at that. But when a carrier has been cited for operating without a license, as each of these carriers was—presenting the possibility that the carrier was also operating without appropriate insurance coverage—the Commission is not required to take the carrier at its word for how long it may have been out of compliance with the ICC’s requirements. It may legitimately seek to establish, independ- ently, to what extent the carrier has engaged in unlicensed operations–i.e., how many operations it has conducted over Illinois roads without a license. This is the obvious point of the ICC’s document requests, and we are given no reason to believe that its requests were a subterfuge for something else, including in particular an effort to affect the carrier’s rates, routes or services. On this point, it bears emphasizing that the carriers have consistently refused to acknowledge the stated purpose for which the ICC has sought the requested documents, which is to document the extent of the carriers’ intrastate operations in violation of Illinois’ licensing and insurance requirements. The carriers seem to assume that the Commission has no need to know anything beyond the fact that a particular carrier was or was not licensed and insured. But, as the ICC has argued without contradiction, the extent of a carrier’s unlicensed and potentially uninsured operations factors into the magnitude of the penalty that the Commission will impose for such opera- tions. Recall that each day of continuous operation in violation of the licensing requirement constitutes a separate violation of the Illinois Commercial Transportation Law. 625 ILCS 5/18c- 24 No. 13-3316 1701. And the Commission’s regulations state expressly that the extent of a carrier’s violative conduct affecting the public interest is a factor bearing on the civil penalties that the Commission may impose. See 92 Ill. Admin. Code § 1440.10(d). The records sought by the ICC thus have an obvious relevance to what additional penalties ought to be imposed on the carriers for their unlicensed operations.7 To assert, as the carriers do implicitly, that the Commission does not need to know how many trips a carrier has made or how much cargo it has transported while it was unlicensed and/or without appropriate insurance coverage is to suggest that all delin- quent carriers should be treated alike; that a carrier which has conducted only five unauthorized trips in a particular time period should be assessed the same penalty as a carrier which has conducted hundreds of such unauthorized trips, for example. This defies common sense, and is inconsistent with the state statutory scheme. The carriers go so far as to suggest that any inquiry at- tempting to ascertain the total number of unlicensed opera- tions they conducted in Illinois represents the very “kind of economic regulation that Congress intended to bar when it passed the FAAAA” and that treating each day of unlicensed operation as a separate violation of Illinois law “is nothing more than economic regulation.” Reply Br. at 5-6. Why they 7 Cf. Nussbaum Trucking, Inc. v. Ill. Commerce Com’n, 425 N.E.2d 1229, 1233- 34 (Ill. App. Ct. 1981) (in ICC proceeding on petition to approve purchase of motor carrier of property, abstracts of representative shipments were competent and admissible to establish that carrier’s operations had not been abandoned, suspended, discontinued, or left dormant). No. 13-3316 25 believe this is so is not clear. We are aware of no case holding that a state may not require a motor carrier of property doing business within its borders to be licensed by that state, particu- larly when licensing is the state’s means of ensuring that the carrier is appropriately insured. Nor are we convinced that a system of penalties proportionate to the extent of a motor carrier’s unauthorized operations could have anything more than a tangential effect on the carrier’s rates, routes, or services. The services a carrier has provided while unlicensed will inform whatever penalty the ICC later chooses to impose, but that penalty logically would not restrain, influence, or other- wise affect the carrier’s choice of rates, routes, or services thereafter. Once the penalty is paid and a license is secured, the carrier is free to provide whatever services it wishes, at the rates it believes appropriate and over the routes of its choosing.8 A proportionate penalty surely will discourage the carrier from ignoring the licensing requirement in the future, but if the licensing requirement itself is permissible, as we are certain it is, then so too is this salutary effect. 8 A hefty fine certainly could put a dent in a carrier’s finances, and perhaps the carrier might seek to charge its customers more (the market permitting), or otherwise modify its rates, routes, or services in an effort to repair the damage to its balance sheet. We very much doubt that this could be characterized as anything more than a tangential effect on the carrier’s rates, routes, and services for purposes of the preemption analysis. Cf. S.C. Johnson, 697 F.3d at 559-60 (alleged bribery conspiracy’s effect on rates customer was charged for carrier’s services insufficient to show customer’s bribery and racketeering claims were preempted). In any event, the carriers do not make this particular argument. 26 No. 13-3316 Promoting financial responsibility by requiring that motor carriers operating within a state’s borders maintain appropri- ate insurance is an area that Congress has expressly reserved to the states; and a licensing regime akin to the one Illinois has established is an obvious and logical way to enforce its insurance requirements. The type of document requests that the ICC has issued to the carriers is also precisely the sort of discovery in which one would expect an agency to engage in order to assess the extent and gravity of a carrier’s non- compliance with the licensing requirement and to assess a proportionate penalty. We are satisfied that the challenged requests fall within the scope of the exception that Congress has established. III. For the foregoing reasons, we AFFIRM the grant of sum- mary judgment in favor of the defendants-appellees.	01-03-2023	04-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/2127446/	15 F. Supp. 541 (1936) DETWILER v. CHICAGO, R. I. & P. RY. CO. et al. District Court, D. Minnesota, First Division. March 30, 1936. 542 Robert J. McDonald and William H. De Parcq, both of Minneapolis, Minn., for plaintiff. Philip Stringer, of O'Brien, Horn & Stringer, of St. Paul, Minn., for defendants. JOYCE, District Judge (after stating the facts as above). I. First, with reference to the demurrer of the defendant corporation: The complaint of the plaintiff alleges in paragraph I the corporate existence and common carrier character of the defendant corporation. Paragraph II recites the proceedings incident to the appointment of the defendant trustees in November, 1933, and their present capacity in that respect. Paragraph III sets forth that the defendants were engaged in the business of a common carrier, and that the plaintiff was employed by them in interstate commerce. It is claimed that plaintiff's injuries occurred July 7, 1935. The answer of the defendant trustees admits their appointment as such trustees by virtue of certain proceedings under the Bankruptcy Act of the United States (section 77, as amended, section 205, title 11 U.S.C.A.) Section 205 (a) of 11 U.S.C.A. (Bankruptcy Act) among other things provides that the court shall have "exclusive jurisdiction of the debtor and its property wherever located." Section 205 (c) (1) among other things provides that "the judge shall appoint one or more trustees of the debtor's property." Section 205 (c) (2) provides: "The trustees * * shall have all the title and shall exercise * * * the powers of a receiver in an equity proceeding, and, * * * the power to operate the business of the debtor." After the debtor is dispossessed, the language of the act suggests operation solely by the trustees. There is no suggestion of joint operation or control by the debtor, as must appear before the case of Pennsylvania R. R. Co. v. Jones, 155 U.S. 333, 15 S. Ct. 136, 39 L. Ed. 176, relied on by the plaintiff, would control the situation. Exclusive possession and occupation of the debtor's property having been lodged in the trustees, pursuant to the provisions of section 205 above set forth, the debtor corporation would not be liable for personal injuries caused by the negligent operation of the railroad by such trustees, in accordance with the rule laid down by Justice Lurton when Circuit Judge, in Memphis & C. R. R. Co. v. Hoechner (C.C.A.) 67 F. 456. The demurrer of the defendant corporation is sustained. II. With reference to the motion of defendants seeking the transfer of the cause to the equity side of the court, staying all proceedings at law in the action until the equitable issues asserted have been disposed of, and for other relief. The defendant trustees have filed answer to the action at law, and further answering and "as a separate defense and as an equitable defense and cross-bill herein" there is set up by the trustee defendants a contract bearing date of November 13, 1935, whereby the plaintiff, in consideration of the sum of $100 paid to him, agreed among other things that he would not sue said railway company or said trustees for his said injuries in any courts except those sitting within the state wherein his injuries were sustained or wherein plaintiff resided at the time his injuries were sustained; said contract appearing as Exhibit A to said answer. The court is asked by defendants' further answer to determine all issues between the parties arising from said contract in advance of the determination of the other issues in the case, to which answer plaintiff has filed his reply. Counsel on both sides have submitted elaborate briefs and have argued the cause at length affecting the validity of the contract, Exhibit A, the reasonableness of the limitation therein contained, the effect of the time of its making, as well as other 543 questions involved. It is my view that the equitable defense set up by the defendant trustees is within the purview of the provisions of the Judicial Code, § 274b (section 398, title 28 U.S.C.A.), which reads as follows: "In all actions at law equitable defenses may be interposed by answer, plea, or replication without the necessity of filing a bill on the equity side of the court. The defendant shall have the same rights in such case as if he had filed a bill embodying the defense of seeking the relief prayed for in such answer or plea. Equitable relief respecting the subject matter of the suit may thus be obtained by answer or plea. In case affirmative relief is prayed in such answer or plea, the plaintiff shall file a replication. Review of the judgment or decree entered in such case shall be regulated by rule of court. Whether such review be sought by writ of error or by appeal the appellate court shall have full power to render such judgment upon the records as law and justice shall require." Montgomery's Manual of Federal Procedure, § 386, states the rule applicable to the situation thus created: "The interposition of the equitable defense converts the proceeding from an action at law to a suit in equity; and hence the proper practice is to order the cause to be transferred to the equity side of the court. Inasmuch, however, as legal and equitable rights and remedies must be kept apart and enforced by separate proceedings, the issue which is created by the equitable defense must be decided according to the rules and procedure of equity, and a legal issue which may remain to be decided must be disposed of pursuant to the rules and procedure of the law side of the court. The matter of defense makes the issue equitable; and this issue is to be tried by the judge acting as a chancellor. Thereafter, the legal issue is triable by jury, and thus the right of trial by jury is preserved. * *" To the same effect is the rule laid down in sections 3848-3850, Hughes Federal Practice. In Union Pacific R. R. Co. v. Syas (C. C.A.) 246 F. 561, on page 566, Judge Carland said: "We are clearly of the opinion that, when equitable relief is asked in an action at law under the statute above quoted, the case for equitable relief should be tried as a case in equity, and that the great weight of authority is in favor of the practice of trying the case in equity first, for this practice serves to keep the equitable matter distinct, and to prevent what must otherwise frequently ensue confusion and embarrassment in the progress of the action." See, also, Liberty Oil v. Condon Nat'l Bank, 260 U.S. 235, 43 S. Ct. 118, 67 L. Ed. 232; Ayres Mercantile Co. v. Union Pacific R. Co. (C.C.A.) 16 F.(2d) 395, and cases cited. Plaintiff urges the case of Radio Corp. v. Raytheon Mfg. Co., 296 U.S. 459, 56 S. Ct. 297, 299, 80 L. Ed. 327, as controlling in the instant case. Suffice it to say that in that case the court said: "The answer with its plea in bar will be searched in vain for the suggestion of an equitable defense." Since such a defense appears in the within case and equitable relief is prayed for, I am of the opinion that the motion of the defendant trustees should be granted and sustained, and it is so ordered, and the cause is transferred to the equity calendar for a determination of the equitable issues involved, and all proceedings at law are stayed until a determination thereof. III. Plaintiff's motion to strike that portion of the answer of the defendant trustees setting up the so-called contract as a defense upon the ground that it appears to be void on its face, and the further motion that if said motion be denied that the defendant trustees amend their answer in certain particulars as set out therein, be and the whole thereof is denied. Exceptions allowed.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2352983/	374 F. Supp. 215 (1974) UNITED STATES v. John Thomas TILLMAN. Crim. No. 935-70. United States District Court, District of Columbia. March 14, 1974. 216 William L. Fallon, Washington, D. C., for defendant. Patricia M. Wald, Mental Health Law Project, Benjamin W. Heineman, Jr., Center for Law and Social Policy, Daniel 217 A. Rezneck, Arnold & Porter, Washington, D. C., amici curiae, appointed by the court. William Collins, Asst. U. S. Atty., United States District Court, Washington, D. C., for the United States. MEMORANDUM OF THE UNITED STATES DISTRICT COURT ON REMAND FROM THE UNITED STATES COURT OF APPEALS PARKER, District Judge. In this memorandum the District Court will set forth the proceedings which have been conducted and the findings which have been made on remand of this case from the Court of Appeals. Pursuant to orders of the Court of Appeals of July 16, 1973, and August 10, 1973, an updated study of the defendant was performed in accordance with 18 U.S.C. § 5010(e) for the purpose of obtaining information concerning the defendant's suitability for treatment under the Federal Youth Corrections Act (YCA). After receipt of the updated 5010(e) report, which purported to recommend against a YCA sentence, the Court determined that it would be necessary to conduct further proceedings in order to present to the Court of Appeals a supplemented record which contained a clear and adequate disclosure on the issues relating to the defendant's sentence. As a result of this inquiry the Court has observed that the recommendations of the updated and original 5010(e) reports against sentencing the defendant under the YCA are founded on improper considerations of law and fact and thus do not support the prior judgment of this Court sentencing the defendant as an adult. Futhermore, during the course of these proceedings the Court discovered procedural and substantive problems in the 5010(e) observation and study process at the Lorton Youth Center's diagnostic unit which have been impeding the preparation of "the type of thorough, knowledgeable report which the Court requires to exercise its responsibilities under the [YCA]."[1] Accordingly, the District Court submits this supplemented record to the Court of Appeals and suggests that the case be remanded so that this Court may: (1) entertain a motion to resentence the defendant pursuant to Rule 35 of the Federal Rules of Criminal Procedure for correction of an illegal sentence; and (2) establish guidelines and instructions for the Department of Corrections to correct present inadequacies in the 5010(e) evaluation process, as reflected in the record, pursuant to the Court's power under 18 U.S.C. § 5010(e) to designate the quality of the information which it desires from the classification or diagnostic agency.[2] 218 Factual Background and Summary of the Proceedings on Remand The defendant was convicted of first degree felony murder[3] in November, 1970, when he was not quite 20 years old, and was sentenced to life imprisonment, with the possibility of parole only after the service of 20 years of his sentence.[4] The Court reconsidered the defendant's sentence after the Court of Appeals held that offenders convicted of murder were eligible for Youth Corrections treatment,[5] and committed the defendant to the classification unit at the Lorton Youth Center for a period of observation and study pursuant to 18 U.S. C. § 5010(e) to obtain information as to whether the defendant would derive benefit from treatment under a YCA sentence. The 5010(e) report which the Court received, dated September 28 and 29, 1973, consisted of a Classification Study prepared by George F. DeFord, Classification and Parole Officer; a Psychological Evaluation prepared by Robert L. Goldstone, Clinical Psychologist; and the Classification Committee's Evaluation and Recommendation signed by Mr. DeFord, Mr. Goldstone, and Joseph E. Cheek, then Associate Superintendent of the Classification Unit. The Classification Committee recommended against a Youth Act commitment for the defendant: "The Committee notes that Mr. Tillman has been consistently involved with aggressive acts for the past eight years and he has been going in a step-by-step fashion to progressively worse offenses. He has exhibited no respect for the properties of others. The staff sees Mr. Tillman as a young man needing to be in a structured situation and needing long term incarceration. The Committee does not feel that Mr. Tillman is a candidate for the Youth Center and its program. Therefore, the Classification Committee recommends that Mr. Tillman be sentenced under 4208(a)(2). In addition, it is felt that Mr. Tillman is a little too assaultive for our population." The Classification Committee, therefore, in reaching its conclusion that the defendant should not be committed to the Youth Center relied heavily on the defendant's involvement in progressively more aggressive offenses for the preceding eight years, his assaultive nature, and his need for a more structured and longer term incarceration than he would receive at the Youth Center. The Classification Study explained that the defendant had only a modicum of potential for rehabilitation, probably not within the framework of the Youth Center, because he was thought to be dull witted, and a "street sophisticate" and "follower type" who has committed progressively more serious aggressive acts. The Psychological Evaluation pointed out that the defendant's major need was psychotherapy which, to be effective, would have to extend for a period longer than the time an individual customarily remains at the Youth Center. It concluded that the defendant should not therefore be sentenced under the YCA. Relying on this 5010(e) report the Court found that the defendant would not benefit from rehabilitative treatment under the YCA, principally for the reason that "the defendant's past and increasing participation in aggressive anti-social behavior" required treatment for a longer period, in a more structured program, and with more extensive psychotherapy, than would be available from a commitment to the Youth Center.[6] The Court reimposed its earlier 219 sentence in November, 1971, from which judgment the defendant appealed. On appeal the defendant challenged, inter alia, the sentence imposed by the District Court for the reason that the Classification Committee might have placed improper reliance in formulating its recommendation against a YCA commitment on the existence of an illegal sentencing alternative.[7] The defendant suggested that the case be remanded to the District Court so that the Classification Committee could produce a new recommendation based on correct statutory sentencing alternatives, and the Court could resentence the defendant accordingly. The Court of Appeals held, in an opinion filed June 6, 1973,[8] that the reasons on which the District Court had based its decision to deny the defendant a YCA commitment were in part legally impermissible and in part lacking in sufficient factual support. The case was remanded for reconsideration of sentence, with the comment that the District Judge might order a new 5010(e) evaluation. The Court initiated the reconsideration of the defendant's sentence by requesting, on July 5, 1973, the preparation of an updated 5010(e) report. The request indicated that additional disclosure would be necessary if the recommendation of the Classification Committee again relied on factors such as overcrowding, lack of local treatment services which meet the defendant's needs, and the defendant's character traits, such as aggressiveness or assaultiveness, factors which in the original 5010(e) report were of some concern to the Court of Appeals. The mandate of the Court of Appeals filed on July 16, 1973, remanded the record to the District Court "for the limited purpose of allowing the trial court to entertain a motion of appellant to have appellant transferred to the Youth Center for an updated 5010(e) Report." The mandate did not appear to grant the District Court jurisdiction to reconsider Youth Corrections sentencing, as had been indicated in the opinion of June 6, 1973, and the Court proceeded accordingly. On August 10, 1973, the Court of Appeals ordered that this case be reheard en banc on the basis of the record as supplemented by the District Court in accordance with the order of July 16, 1973, and vacated the opinion and judgment filed on June 6, 1973. The updated 5010(e) report, received by the Court in late August, 1973, consisted of a Special Progress Report on the defendant's adjustment to the Lorton adult complex prepared by Classification and Parole Officer Pearson Parker; a Psychological Re-Evaluation prepared by Mr. Goldstone; and an August 17, 1973 "Addendum to Classification Study Dated September 29, 1971" signed by a Classification Committee consisting of Mr. Goldstone, Mr. DeFord, and M. H. Stokes, Acting Administrator of the Diagnostic Center. The Addendum addressed what the Committee[9] felt to be the most important considerations relating to the defendant's suitability for a YCA commitment: the defendant's character traits of aggressiveness and assaultiveness, and whether he would benefit from the Youth Center's established program. On the subject of aggressiveness and assaultiveness, the Committee concluded that the defendant's 220 behavior since his initial 5010(e) commitment had not been indicative of aggressive or assaultive character traits, but rather was conforming and non-hostile.[10] With reference to the defendant's capacity to benefit from the Youth Center program, the Committee's recommendation, although somewhat ambiguous, purported to be against a YCA commitment. The Committee offered these reasons for its recommendation: the defendant's low intelligence level offered negligible hope of benefit from the Youth Center's academic program; the defendant's need for long term psychotherapy would extend beyond the usual stay at the Youth Center; the defendant would not benefit from Youth Center vocational programs because of his limited vocational potential, and would best function in his present vocational capacity at the Lorton adult complex as a forklift operator; and the defendant should not be given a Youth Act sentence because he had made a satisfactory adjustment to the adult complex. The Addendum also pointed out, however, that the defendant had a dire need for placement in psychotherapy which could be made available at the Youth Center and which could have a significant beneficial impact if the defendant's involvement were long term.[11] After consideration of the updated 5010(e) report it became apparent that further inquiry into matters presented by the report would be required in order to provide the Court of Appeals with a totally clear and adequate record on remand containing complete disclosure on the issues relevant to the sentencing of the defendant. This inquiry was necessary because particularly with respect to the defendant's ability to benefit from psychotherapy, academic and vocational treatment programs, the Court ascertained ambiguities and inconsistencies in the updated report, discrepancies between the original and updated reports, and the lack of comprehensive factual background data to support and explain the Committee's recommendations. The updated and original reports also raised significant questions as to whether the type of information and analysis which the District Court had been receiving generally in 5010(e) reports was sufficient to enable a judge to make a knowledgeable determination of whether an offender would benefit from a YCA sentence. Thus the Court initiated an extensive probe into the 5010(e) process in order to insure that the 5010(e) studies of the defendant could be thoroughly evaluated in view of the applicable YCA sentencing criteria, and to bring to light the underlying problems affecting the quality of the studies which the Court had been receiving, as reflected in the studies of the defendant. In furtherance of its inquiry the Court appointed amici curiae; sent a questionnaire to the Department of Corrections to elicit information relevant to sentencing of persons under the YCA; requested a clarification of the updated 5010(e) report; conducted a hearing to further illuminate the reasoning behind the Classification Committee's recommendations; and requested the Board of Parole to review the defendant's case. The Court gratefully acknowledges the prodigious assistance provided by the amici curiae and the defendant's counsel in these proceedings. The clarification of the updated 5010(e) report, dated November 30, 1973 and entitled "Supplement to Addendum Dated August 11, 1973,"[12] particularized the reasons for the Classification Committee's[13] recommendation of an adult sentence. These may be summarized as follows: (1) The defendant has made a satisfactory adjustment to the Lorton adult 221 complex working as a forklift operator and would have difficulty adjusting to the Youth Center because he is older than the average resident, the residents are not his peers, and he would be emotionally discomforted to experience a lengthy confinement while seeing other residents, committed for shorter terms, come and go; (2) The defendant's low intelligence level would hamper any significant progress in academic and vocational programs; (3) The defendant needs long term psychotherapy treatment which he could obtain at the adult complex. The Board of Parole, after review of the defendant's case, submitted a letter dated January 16, 1974 signed by H. Albion Ferrell, Vice Chairman, reversing the position which it took after review of the original 5010(e) report,[14] and suggesting that "the ends of justice might well be served by substituting a youth act commitment for the originally imposed adult sentence." Mr. Ferrell stated that although the original 5010(e) study indicated that the defendant had a "fairly deeply ingrained pattern of criminal behavior" and no inclination to change his behavior pattern,[15] significant changes had developed during his ensuing three year incarceration. Classification and Parole Officer Pearson Parker informed Mr. Ferrell that the defendant has had no substantial disciplinary problems, that he has performed very well in his work assignments at the print shop and industries warehouse, and that he is enrolled in the academic school and is doing quite well.[16] The answers to the November 1973 questionnaire to the Department of Corrections contain information of a general nature on the 5010(e) observation and study process at the Lorton Youth Center, such as the standards and factors involved in making a 5010(e) recommendation, and statistics on the treatment programs, facilities, staff, inmate population, and so on. Also a substantial quantum of testimony was developed at the hearing on December 28, 1973 and January 2, 1974 relating to the 5010(e) studies of the defendant and to diagnostic unit procedures at the Lorton Youth Center and Federal Youth Centers. The Court called as witnesses three members of the Classification Committee: Mr. Cheek, Mr. DeFord and Mr. Goldstone; the Administrator of Lorton Youth Center I, Robert C. Whitaker; and the Administrator of Case Management for the Federal Bureau of Prisons, James D. Williams. Information from these sources will be cited where it is relevant to the discussion in subsequent portions of this memorandum. Adequacy of the Reasons Contained in the 5010(e) Reports As a Basis for Denying a YCA Sentence The detailed inquiry which has been conducted, as summarized in the preceding section, served to clarify and flesh out the findings and reasoning of the Lorton Youth Center diagnostic personnel who participated in the 5010(e) evaluation of the defendant. For this reason these proceedings are considered to have been within the intended scope of the Court's jurisdiction on remand. A question remains, however, as to the extent to which the Court may delve into an analysis of the factual record which it has developed, particularly when that 222 may involve comment on issues which are before the Court of Appeals. The record as supplemented by the Court plainly reveals that the defendant's adult sentence is invalid because it was based on reasons which were and are not factually and legally inadequate to sustain a finding that the defendant would not benefit from treatment under the YCA. At the very least the record demonstrates that under the present circumstances it would be in the interests of justice to reconsider the defendant's eligibility for YCA sentencing. Because the Court considers that it has a duty to facilitate the correction of an illegal sentence whenever such may appear, it sets forth the following findings in support of its suggestion of remand of the case for reconsideration of sentence, or alternatively, for the use of the Court of Appeals in connection with the rehearing of this case en banc.[17] When the reasons and conclusions in the several 5010(e) reports in support of the Classification Committee's recommendation against YCA treatment are distilled to their essence, four primary considerations emerge.[18] These are that the defendant needs psychotherapy treatment for a longer term than is available at the Lorton Youth Centers but which would be available at the adult complex; that the defendant has little potential to benefit from educational and vocational programs at the Youth Center; that the defendant has made a satisfactory emotional adjustment to the adult complex and transfer to the Youth Center would negatively affect his emotional stability; and that the defendant's prior record of aggressive behavior makes him unsuitable for treatment at the Youth Center. These will be dealt with seriatim. 1. Need for Long Term Psychotherapy Treatment. A consistent theme of the 5010(e) reports has been the defendant's need for psychotherapy treatment extending over a long term, i. e., approximately one to five years.[19] The key figure in this regard is Mr. Goldstone, the clinical psychologist who prepared the psychological evaluations of the defendant. In the Psychological Re-Evaluation of the updated 5010(e) study, Mr. Goldstone commented that the defendant had been able to gain some insight into his problems and had become more realistic about himself and his future (despite the apparent absence of any psychotherapy treatment at the adult complex).[20] It was felt that the defendant's major need was psychotherapy, through which he could be helped to achieve a better understanding of himself and how to deal with his emotional problems. Mr. Goldstone made it clear at the hearing that his recommendation against a YCA sentence was not based on a determination that the defendant would not benefit from YCA treatment. Instead, his decision was founded on the belief that the defendant would not benefit very much from participation in the group therapy program at the Lorton Youth Center because he needs long term treatment and probably would not remain at the Youth Center long enough for the treatment to be effective.[21] The average length of incarceration at the Lorton Youth Center 223 for defendants committed under 18 U.S.C. § 5010(c) is 19 months.[22] The hesitancy of Mr. Goldstone and the Classification Committee[23] to recommend a YCA sentence for offenders who require treatment for periods longer than the average inmate stay is borne out by the response of Charles M. Rogers, Assistant Director for Operations of the Department of Corrections, to question 2(c) of the November 1973 questionnaire: "Q. 2.(c) To what extent is the judgment whether a defendant will benefit from treatment under the Youth Act made on the basis of the length of time required for treatment of the individual? A. If in the judgment of the diagnostic staff a defendant would require long term treatment within an institutional setting, involving several years, serious consideration would be given to a recommendation other than the Youth Act. If it is felt that a shorter term is needed in an institutional setting with long term parole supervision, a Youth Act recommendation is considered if otherwise the defendant seems amenable to treatment." This philosophy is also shared by Mr. Whitaker, Administrator of Lorton Youth Center I: "Q. Do you regard a person who requires long-term incarceration or long-term treatment as unsuitable for treatment under the Youth Corrections Act? A. Yes sir."[24] Mr. Whitaker regards treatment to be long term if it is in excess of two years.[25] The picture which emerges is that the Lorton Youth Center, because of its limited capacity, has been oriented to provide only short term treatment (i. e., less than two years) and offenders who require treatment for longer periods are likely to be rejected for that reason. In the defendant's case, he was rejected not because he would not benefit from YCA treatment, but because he needed more treatment than the Lorton Youth Center staff felt it could provide. The Federal Youth Corrections Act, 18 U.S.C. § 5010(c), expressly provides for long term treatment for youth offenders. Congress added what is now section 5010(c) to the YCA "so that those youths who might not have qualified for treatment under section 5010(b) because of the inadequacy of the six year limitation, could be sentenced under the Act."[26] Therefore, the conclusion of Mr. Goldstone and the Classification Committee that the defendant could make rehabilitative progress from involvement in long term psychotherapy would appear to support a finding that the defendant would benefit from YCA treatment. Certainly a recommendation against a YCA commitment because of the lack of long term psychotherapy treatment facilities is improper. The District Court has already held that "[t]here is no legal authority for diverting otherwise eligible youths to adult institutions due solely to lack of space."[27] Similarly, there is no legal authority to deny an eligible offender a Youth Act sentence because of the inability of the correctional institutions to provide treatment contemplated by the Act. If the Lorton Youth Centers cannot, as a practical matter, accommodate offenders with long term treatment needs, there appears to be no legal obstacle to prevent cooperation in this regard between Lorton and the Federal 224 Bureau of Prisons, which does have long term treatment programs.[28] Thus reliance by the Court on the defendant's need for long term psychotherapy treatment in denying the defendant a YCA sentence was improper. 2. Inability to Achieve Academic or Vocational Gains. Although not cited in the original 5010(e) report, the subsequent 5010(e) recommendations against YCA sentencing relied on the defendant's lack of potential to benefit from academic or vocational programs at the Youth Center because of his low intelligence. At the outset it should be stated that the defendant's inability to achieve educational or vocational gains does not necessarily mean that he would not benefit from YCA treatment. Such programs may be unnecessary where the causes of an offender's antisocial tendencies are correctable primarily through psychological, psychiatric or other treatment. The 5010(e) reports did not address the question of whether or to what extent the defendant needed academic and vocational treatment. Instead they simply concluded that he would not fit into the established programs at the Youth Center, regardless of whether those programs provided the spectrum of treatment services contemplated by the YCA or needed by the defendant. Although the defendant's capacity to make academic or vocational gains may very well be related to whether he could make rehabilitative progress from treatment under the YCA, the 5010(e) reports neither commented on this question nor provided the Court with sufficient information upon which to make a determination. Addressing solely the question of whether the defendant's low intelligence level would "hamper his making any significant progress in a school and/or vocational program" at the Youth Center, the evidence on the record does not support the Classification Committee's position and some of it tends to show that the defendant would make academic, vocational and rehabilitative progress from participating in the programs. The defendant had been characterized to be in the "bottom of the dull range of intelligence"[29] and was assessed to have limited vocational potential for the Youth Center programs.[30] However, the 5010(e) reports did not explain why a person of the defendant's intelligence level could not make progress in the Center's basic reading and mathematics programs. In fact the defendant's reading level is not very different from those of many of the Center's inmates,[31] and he was credited with a grade of "A" for a math class report dated June 29, 1973, at the adult complex.[32] The defendant's reading level presently qualifies him for some of the vocational programs at the Youth Center, and it is the policy of the Center to offer part or full time reading and training programs to persons whose reading is deficient until they are able to meet the entry qualifications.[33] The defendant adjusted quite well to his work assignments at the industries warehouse and print shop at the adult complex[34] and there is no reason to suppose that he would not make further rehabilitative progress through the academic and vocational programs at the Youth Center. Thus the defendant does appear to have some rehabilitative potential in the academic and vocational areas, and whatever this potential is, it has not been shown why it would adversely affect the defendant's ability to benefit from rehabilitative treatment under the YCA. 225 3. Satisfactory Adjustment to the Adult Complex and Detriment to Emotional Stability Resulting From Transfer to the Youth Center. The Classification Committee recommended that the defendant should remain at the adult complex because he has made a satisfactory adjustment and might be adversely affected by a transfer to the Youth Center since he would not be among his peers and his relatively long term confinement witnessing other inmates come and go could be emotionally discomforting. As a legal justification for denying an eligible offender a YCA sentence this reasoning is dubious. Only if the Court finds that the defendant would not derive benefit from rehabilitative treatment under the YCA can it sentence him as an adult.[35] Satisfactory adjustment to an adult institution is logically irrelevant to this question.[36] Severe emotional maladjustment to a YCA commitment might be cause to find that an offender would not benefit from treatment under the Act, but such a judgment could be made only after a careful and realistic analysis of the offender's treatment needs and the degree to which they could be met by available YCA treatment alternatives,[37] and would have to stand up against the statutory presumption in favor of YCA sentencing.[38] This is not the kind of analysis which the 5010(e) reports have provided. The Classification Committee's conclusion that the defendant might have difficulty adjusting to the Youth Center is not a judgment that the defendant would not benefit from a YCA sentence, but rather that the failure of the Lorton Youth Center to segregate offenders according to their treatment needs, as the Center is required to do by the Act,[39] might be detrimental to the defendant. Any difficulty which the defendant might experience in adjusting to the Youth Center would be due, not to his lack of rehabilitative potential, but to the lack of facilities for long term treatment for offenders 22 years of age or older. Should it be determined that it is impractical or unfeasible to establish such a program at Lorton, the Court may inquire into the availability of an appropriate program at other youth centers. Additionally, the Classification Committee has provided no underlying factual data to support its conclusions. Although it is possible that transfer to the Youth Center might adversely affect the defendant's emotional stability, it seems just as plausible that continued confinement at the adult complex would unnecessarily expose the defendant to more hardened criminal types, in violation of the intent of the Act, and would negatively affect his emotional stability because of the knowledge that no matter how well he performs he must remain confined for 20 years. Not only did the Classification Committee fail to address these questions, but they did not consult with the defendant to determine directly what his feelings would be about transfer.[40] The present state of the record in this area, therefore, would not support a judgment sentencing the defendant as an adult. 4. Prior Record of Aggressive Behavior. In the original 5010(e) study the Classification Committee, after examining the defendant's prior criminal 226 record, concluded that the defendant's increasing involvement in aggressive antisocial acts rendered him too assaultive to be placed in the Youth Center, which could not provide a sufficiently structured environment for him.[41] Since the YCA expressly provides for maximum security treatment facilities and segregation of offenders according to their needs for treatment, the Committee's recommendation again seems to have been premised on the Youth Center's lack of required treatment facilities rather than on the defendant's capacity to benefit from treatment. Although it would have been permissible and desirable for the Committee to have attempted to relate the defendant's prior behavior to the existence of character traits relevant to rehabilitative potential, such as incorrigibility or attitude towards rehabilitation, it did not do this, and the Court took the analysis no further. The entire argument was abandoned in the updated 5010(e) studies of August 17, 1973 and November 30, 1973 which reported that the defendant had adjusted well, was neither hostile, aggressive nor assaultive, and presented no behavior problem.[42] It was thought, however, that the root causes of the defendant's prior criminal acts had not been adequately treated. Thus the record reflects that the original finding that the defendant would not benefit from a YCA commitment because of his prior record of aggressive behavior was legally and, in hindsight, factually erroneous. The defendant's manifestations of criminal behavior appear to be controllable and very possibly remediable through proper rehabilitative treatment. Conclusion The principal reasons cited in the original 5010(e) report and relied upon by the Court for sentencing the defendant as an adult, and the reasons subsequently established in the August 17, 1973 Addendum and November 30, 1973 Supplement, are insufficient to support a finding that the defendant would not benefit from rehabilitative treatment under the YCA. Accordingly, it is suggested that this case be remanded to permit the Court to vacate the prior illegal sentence which it entered and to reconsider the eligibility of the defendant for a YCA sentence. On remand the Court contemplates the issuance of guidelines and instructions to the Lorton Youth Center classification or diagnostic unit to insure that future 5010(e) reports will contain information which is legally and factually relevant to the question of whether an offender would derive benefit from rehabilitative treatment under the YCA. The need for guidelines of this type has been made clear. The several 5010(e) reports, the testimony of the members of the Classification Committee and correctional officials, and the responses to the Court's questionnaire, demonstrate that the 5010(e) study and observation process at the Lorton Youth Center is marred by a lack of understanding of the kind of information 227 which the courts need to make informed and proper YCA sentencing judgments. Some of the inadequacies in the process may be apparent from the discussion above, and a more complete catalogue has been compiled by the amici curiae.[43] As a result of these deficiencies many eligible youth offenders such as the defendant may have been improperly denied YCA treatment and the possibility of rehabilitation, to the benefit of neither themselves nor society.[44] Closer communication and cooperation between the courts and correctional personnel in these areas is necessary to ensure that YCA sentencing decisions conform to the congressional design. NOTES [1] United States v. Alsbrook, 336 F. Supp. 973, 975 (D.D.C.1971) [2] The Court cannot presently entertain a motion for correction of sentence pursuant to Rule 35 since an appeal is pending, United States v. Mack, 151 U.S.App.D.C. 162, 466 F.2d 333, 340 (1972) cert. denied, 409 U.S. 952, 93 S. Ct. 297, 34 L. Ed. 2d 223 (1972) and the scope of the Court's jurisdiction on remand does not comprehend the authority to resentence the defendant. See p. 219 infra. Because, however, it has become clear as an incident of the remand proceedings that there is no justification on the record for finding that the defendant would not benefit from rehabilitative treatment under the YCA, the Court believes it is appropriate to indicate this finding to the Court of Appeals, cf. Smith v. Pollin, 90 U.S. App.D.C. 178, 194 F.2d 349, 350 (1952), and to suggest remand for the purpose of correcting the illegal sentence. The Court cannot indicate its sentencing preference at this time since there are unanswered questions as to the defendant's capacity to make rehabilitative progress under the YCA which should be addressed. It is anticipated that the issuance of guidelines and instructions to the Department of Corrections will enable the Court to obtain the information which it needs to make a proper sentencing determination. [3] 22 D.C.Code § 2401. The defendant was also convicted of attempted robbery while armed, 22 D.C.Code § 3202, and carrying a dangerous weapon, 22 D.C.Code § 3204. [4] See 22 D.C.Code § 2404. [5] United States v. Howard, 146 U.S.App.D.C. 10, 449 F.2d 1086 (1971). [6] Memorandum Opinion filed November 5, 1971. [7] The Classification Committee's Evaluation and Recommendation in the original 5010(e) report recommended that the defendant should be given an indeterminate adult sentence pursuant to 18 U.S.C. § 4208(a)(2). The defendant was ineligible for sentencing pursuant to that provision. [8] United States v. Tillman, No. 71-1352 (D. C.Cir. June 6, 1973). [9] Although signed by Stokes, Goldstone and DeFord, the Addendum was apparently written by DeFord. See Transcript of Hearing of December 28, 1973 and January 2, 1974 (Tr.) at 12-13, 192-93. Mr. Stokes, as Acting Administrator, replaced Mr. Cheek only for the Addendum. [10] The Special Progress Report made similar findings. [11] The Psychological Re-Evaluation also confirmed the defendant's "major need" for psychotherapy. [12] The actual date of the Addendum is August 17, not August 11. [13] The Supplement was signed by the members of the original Classification Committee, Cheek, DeFord and Goldstone. [14] The letter of the Board of Parole dated October 8, 1971 and also signed by Mr. Ferrell, indicated concurrence with the original 5010(e) recommendation against YCA sentencing because the defendant's behavior pointed to serious psychological problems requiring "extended therapy, not possible at the Youth Center." [15] The Board of Parole's October 8, 1971 letter made no reference to the defendant's ingrained pattern of criminal behavior or his lack of inclination to change his behavior. The original 5010(e) report did not comment on the defendant's attitude toward rehabilitation or the degree to which his pattern of criminal behavior was ingrained. [16] It is not known whether Mr. Ferrell relied simply on Mr. Parker's July 25, 1973 Special Progress Report, or obtained other information from Mr. Parker. [17] See note 2, supra. [18] There are other factors which may have influenced the Committee's recommendation, including reliance on 18 U.S.C. § 4208 as an alternative available sentencing provision, overcrowding at the Youth Center, and the belief that the defendant has limited capacity to change his behavior or character traits because he has the personality of an adult. The Court rejects these reasons as a basis for making a "no benefit" finding. For a discussion of these and other factors see Post Hearing Memorandum of Amici Curiae, filed February 4, 1974 at 5-37. [19] Tr. at 184, 191. [20] The August 17, 1973 Addendum points out that after interviewing the defendant it was discerned that he was not involved in psychotherapy at the adult complex. See also tr. at 118-19. [21] Tr. at 184-85. [22] November 1973 Questionnaire, response to question 5(b). [23] Mr. DeFord confirmed that he thought the need for long term treatment would be a disqualifying factor for YCA sentencing. Tr. at 80-82, 89. Mr. Cheek testified to the same effect. Tr. at 374, 377, 385-86. [24] Tr. at 490. [25] Tr. at 491. [26] United States v. Coefield, 155 U.S.App.D. C. 205, 476 F.2d 1152, 1160 (1973) (appendix). [27] United States v. Alsbrook, supra note 1, 336 F. Supp. at 976. [28] Testimony of James D. Williams, tr. at 526, 528-29. [29] August 17, 1973 Addendum. [30] Id.; November 30, 1973 Supplement. [31] See tr. at 332-36; November 1973 Questionnaire, Appendix E. [32] Special Progress Report dated July 25, 1973. [33] November 1973 Questionnaire, Appendix E. [34] Special Progress Report dated July 25, 1973. [35] United States v. Waters, 141 U.S.App.D. C. 289, 437 F.2d 722, 724, 727 (1970). [36] United States v. Matthews, 480 F.2d 1191, 1192-1193 (D.C.Cir.1973). [37] 18 U.S.C. § 5011 provides for treatment of committed youth offenders in various types of institutions which offer the essential varieties of treatment and, insofar as practical, segregate classes of offenders according to their needs for treatment. Treatment of offenders in appropriate outside facilities may be contracted for under § 5013. [38] See United States v. Waters, note 35 supra. [39] See note 37 supra. [40] Tr. at 403. [41] The Classification Committee's finding of aggressiveness and assaultiveness requiring a more structured environment is in some respects inconsistent with other portions of the 5010(e) study. For example, the Committee noted that the defendant is primarily a passive individual who exhibits aggressive behavior after exposure to intoxicants; the Psychological Evaluation pointed out that the defendant is easily influenced by his peers and shapes his behavior in order to gain acceptance from them; and the Classification Study spoke of the defendant as comparatively cooperative, as having made a very satisfactory adjustment to the Youth Center, and as having presented no behavior problem. These observations depict an individual who is generally nonaggressive and whose susceptibility to commit occasional aggressive acts can be controlled. This is the analysis which was ultimately recognized in the updated 5010(e) report and the letter of the Board of Parole of January 16, 1974. See note 42 infra and accompanying text. [42] The subject of the defendant's behavioral complexion is discussed in the July 25, 1973 Special Progress Report, the August 17, 1973 Addendum, the Psychological Re-Evaluation, and also in the January 16, 1973 letter from the Board of Parole. [43] See Post-Hearing Memorandum of Amici Curiae, filed February 4, 1974 at 39-86. [44] On April 1, 1974 the Court of Appeals, en banc, entered an order granting the request that this case be remanded to the District Court for purposes of entertaining a motion to resentence the defendant under Rule 35 F.R.Cr.Proc., for correction of an illegal sentence and for such other action as required under the circumstances in the case.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2377644/	388 F. Supp. 2d 307 (2005) In re THE WARNACO GROUP, INC. SECURITIES LITIGATION (II) No. 01 Civ. 3346(MGC). United States District Court, S.D. New York. September 21, 2005. 308 Lovell Stewart Halebian, LLP, New York, NY, By: Christopher Lovell, Frederick W. Gerkens, III, Robert W. Rodriguez, for Plaintiffs. Davis Polk & Wardwell, New York, NY, By: Daniel F. Kolb, Amelia T.R. Starr, Gina Caruso, for Deloitte & Touche LLP. OPINION CEDARBAUM, District Judge. This action is the second of two securities class actions filed in the wake of a series of belated financial restatements made by The Warnaco Group, Inc. ("Warnaco"). The present action is brought on behalf of all purchasers of Warnaco common stock between August 15, 2000 and June 8, 2001. Plaintiffs brought claims against Warnaco and several of its officers and directors for violation of Sections (10)(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and a common law claim for breach of fiduciary duty. In the course of the litigation, plaintiffs amended the complaint to add Warnaco's outside accountant, Deloitte & Touche LLP ("Deloitte"). 309 On September 26, 2003, Deloitte moved to dismiss the claims against it pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6). After the claims against Deloitte had been dismissed without prejudice, plaintiffs filed an amended complaint. Deloitte again moved to dismiss the claims against it. At the oral argument, I instructed plaintiffs to file another amended complaint which clearly sets forth the allegations against Deloitte, and reserved decision on Deloitte's motion. On January 13, 2005, plaintiffs filed a 116-page amended complaint against Deloitte. BACKGROUND This action arises from Warnaco's collapse in 2001 after numerous disclosures that it had significantly misreported its financials for several years. Plaintiffs allege that Deloitte, Warnaco's outside accountant during 2000 and 2001, knowingly made a number of affirmative misstatements during the class period. Plaintiffs also allege that Deloitte failed to correct statements it had made before the class period after discovering that they were false. On May 16, 2000, before the class period, Warnaco filed its annual audited financial statement on Form 10-K for the fiscal year 1999 ("FY1999"). Amend. Compl. ¶¶ 50, 74. As later restatements revealed, that financial statement contained numerous errors. It overstated Warnaco's total stockholder equity by $30,131,000, or nearly five and one half percent of the reported amount of $563,316,000. Id. ¶¶ 1, 75. $26,000,000 of this overstatement was attributable to the false valuation of reserves for returned, unsold merchandise, and $4,131,000 was attributable to the misreporting of intercompany account balances between Warnaco and its subsidiary, Designer Holdings Ltd. ("Designer Holdings"). Id. ¶¶ 3, 11, 75. In addition, the financial statement understated accounts payable by $18,424,000 as a result of errors relating to Designer Holdings, and overstated accounts receivable by $64,100,000, inventory by $11,900,000, and other assets by $6,500,000. Id. ¶ 75. The FY1999 financial statement was accompanied by an audit letter from Deloitte. The letter stated that Deloitte had conducted an audit of Warnaco in accordance with Generally Accepted Auditing Standards ("GAAS"), and that, in Deloitte's opinion, Warnaco's financial statement "present[ed] fairly, in all material respects, the financial position of The Warnaco Group, Inc. and subsidiaries as of January 1, 2000, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America." Id. ¶ 80. Plaintiffs allege that in September 2000, within the class period, a Warnaco executive began reporting to management about accounting errors, potentially involving tens of millions of dollars, relating to Warnaco's Designer Holdings subsidiary. Id. ¶¶ 134-35. In November 2000, these errors were discussed at the third quarter audit review meeting, which Deloitte personnel attended. Id. ¶¶ 132, 136. According to the amended complaint, as a result of that meeting, Deloitte became aware of the Designer Holdings errors in the audited FY1999 financial statement.[1]Id. ¶ 136. 310 In addition, the complaint alleges that in October 2000, Warnaco's true financial condition was such that the company was in default of its debt to equity ratio covenants under its credit agreements. Id. ¶¶ 4, 119-20, 137-40. To avert discovery of this fact, Warnaco issued an interim financial statement on November 14, 2000 that misreported its condition. Id. ¶¶ 2, 10, 122. The correct numbers for Warnaco's cash and long term indebtedness, according to the complaint, were made known to Deloitte in writing and orally by November 3, 2000. Id. ¶¶ 2, 10. They were also publicly disclosed in a press release on November 2, 2000. Id. ¶ 119. However, before issuing the November 14, 2000 interim financial statement, Warnaco's management allegedly changed these numbers. Id. ¶ 10. According to the complaint, Deloitte knew but failed to inform the public that Warnaco was no longer in compliance with its debt covenants. Id. ¶ 173. The complaint also alleges that, within the class period, Warnaco issued several quarterly financial statements that contained numerous falsehoods. In addition to failing to disclose Warnaco's default under its credit agreements, these quarterly statements significantly overstated stockholder equity, accounts receivable, revenues, and assets; substantially understated liabilities; and misclassified various inventory write-offs as "restructuring charges" or charges relating to "strategic review." Id. ¶¶ 90, 97-98, 101, 115, 117, 125-28. Plaintiffs allege that, although these quarterly statements were unaudited, id. ¶¶ 93, 113, they were "examined or reviewed" by Deloitte and referred investors "for further information" to the annual financial statements that Deloitte had audited, id. ¶¶ 71, 93, 106, 113, 147, 273. On March 29, 2001, after it had become publicly known that Warnaco was not in compliance with its credit agreements, Warnaco issued a press release announcing that it had received a temporary waiver from its lenders and that it was negotiating permanent amendments to its credit agreements in order to avoid a possible default. Id. ¶ 154. On the same day, Warnaco issued a chargeback restatement, acknowledging that it had understated reserves for returned, unsold merchandise in its financial statements for the years 1997 to 1999. Id. ¶¶ 2, 60, 153. According to the complaint, Deloitte first became aware of this understatement in mid-February 2000, but advised Warnaco not to disclose it until the Securities and Exchange Commission ("SEC") began to investigate the company in early 2001. Id. ¶¶ 2, 9, 59-60. On April 13, 2001, Warnaco reported that it had received an extension of the temporary waiver from its lenders, and that it continued to be in discussions to revise its credit agreements. Id. ¶ 156. On April 17, 2001, Warnaco filed with Form 10-K its annual audited financial statement for the fiscal year 2000 ("FY2000"). Id. ¶ 158. According to the complaint, that statement contained a number of significant falsehoods. It overstated stockholder equity and inventory by, respectively, $97,675,000 and $1,252,000, and understated liabilities and accounts payable by a total of $96,762,000. Id. ¶ 160. The FY2000 financial statement was accompanied by an audit letter from Deloitte. Id. ¶ 158. In the letter, Deloitte stated that it had audited Warnaco in accordance with GAAS, and that "in our 311 opinion, [Warnaco's] consolidated financial statements present fairly, in all material respects, the financial position of The Warnaco Group, Inc. and subsidiaries as of December 30, 2000 and January 1, 2001, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America." Id. ¶ 166. In addition, however, Deloitte's audit letter stated that "[t]he Company was not in compliance with certain covenants and ... has a working capital deficiency." These issues, Deloitte warned, "raise substantial doubt about [Warnaco's] ability to continue as a going concern.... The company's ability to continue to operate as a going concern is dependent on the outcome of negotiations [with its creditors] or upon its ability to refinance its debt." On April 20, 2001, Warnaco issued a $190,459,000 restatement of its third quarter 2000 interim financial statement. Id. ¶ 170. Also in April 2000, Deloitte issued a `material weakness' letter to Warnaco, which was not publicly disclosed, detailing the financial chaos within the company, including the failure to reconcile intercompany accounts and to have reliable accounting for international operations. Id. ¶¶ 5, 181. In the end, plaintiffs allege, "Warnaco's true undisclosed financial condition rendered [it] unable to obtain waivers and caused it to have to file for bankruptcy." Id. ¶ 169. On June 11, 2001, Warnaco announced that it had voluntarily petitioned for protection under Chapter 11 of the Bankruptcy Code. Id. ¶ 197. Shortly thereafter, Warnaco began issuing a number of restatements of the financial statements audited by Deloitte. Id. ¶¶ 4, 198. According to the complaint, these restatements disclosed multiple violations of GAAS by Deloitte in the audit of the FY1999 and FY2000 financial statements. Id. ¶¶ 167, 203, 210-11. DISCUSSION The standard applied to a motion to dismiss a complaint is well-established. A court must accept as true all well-pleaded allegations in the complaint and draw all reasonable inferences in favor of the plaintiffs. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002); King v. Simpson, 189 F.3d 284, 287 (2d Cir.1999). A complaint may be dismissed for failure to state a claim "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the [complaint's] allegations." Olkey v. Hyperion 1999 Term Trust, Inc., 98 F.3d 2, 5 (2d Cir.1996) (internal quotation omitted). The Court need not, however, credit conclusory statements unsupported by factual allegations. De Jesus v. Sears, Roebuck & Co., Inc., 87 F.3d 65, 70 (2d Cir.1996). Deloitte argues that plaintiffs' amended complaint fails to state a claim for securities fraud because it does not allege a material misleading statement or omission attributable to Deloitte within the class period and because it fails to plead loss causation. In addition, Deloitte contends that the amended complaint fails to state a claim for breach of fiduciary duty because Deloitte owed plaintiffs no such duty. I. Securities Fraud Under Section 10(b) and Rule 10b-5 Section 10(b) of the Securities Exchange Act protects investors by making it unlawful "[t]o use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of 312 investors." 15 U.S.C. § 78j(b). Rule 10b-5, promulgated by the SEC, makes it unlawful: "(a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5. To state a claim under Section 10(b) and Rule 10b-5 for a misleading statement or omission, as plaintiffs seek to do here, plaintiffs must allege that the defendant "(1) made misstatements or omissions of material fact; (2) with scienter; (3) in connection with the purchase or sale of securities; (4) upon which plaintiffs relied; and (5) that plaintiffs' reliance was the proximate cause of their injury." Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 172 (2d Cir.2005). The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides that, where misleading statements or omissions under Section 10(b) are alleged, a plaintiff must "specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b)(1). A. Misleading Statement or Omission Plaintiffs contend that Deloitte made several actionable misstatements or omissions during the class period. First, they argue that Deloitte had a duty to correct the Designer Holdings errors in Warnaco's FY1999 financial statement after discovering them in the fall of 2000. These errors, plaintiffs allege, were relied upon by investors during the class period because they appeared in the most recent audited financial statement in existence at the time, to which investors were periodically referred by Warnaco's class period quarterly statements. It is settled that silence where there is a duty to disclose can constitute a false or misleading statement within the meaning of Section 10(b) and Rule 10b-5. See Wright v. Ernst & Young LLP, 152 F.3d 169, 177 (2d Cir.1998) (citing Basic, Inc. v. Levinson, 485 U.S. 224, 239 n. 17, 108 S. Ct. 978, 99 L. Ed. 2d 194 (1988)). Consistent with that principle, "[a]ccounting firms ... have a duty to take reasonable steps to correct misstatements they have discovered in previous financial statements on which they know the public is relying." Wright, 152 F.3d at 177 (internal quotation omitted); see also Shapiro v. Cantor, 123 F.3d 717, 721 (2d Cir.1997) (noting that "in a situation in which the accountant `gives an opinion or certifies statements' about a company statements which the accountant later discovers may not have been accurate then the accountant has a duty to disclose the fraud to the public") (quoting In re Cascade Int'l Sec. Litig., 894 F. Supp. 437, 443 (S.D.Fla.1995)). The duty to correct previous statements, however, extends only to statements the accounting firm audited. See IIT, an Int'l. Inv. Trust v. Cornfeld, 619 F.2d 909, 927 (2d Cir.1980) ("Andersen had no independent duty to see to the correction of portions of the prospectus other than the financial statement it prepared."). Deloitte contends that even if it had discovered the Designer Holdings errors in the fall of 2000, it had no duty to disclose them because they were, as a matter of law, immaterial. To state a cognizable claim for securities fraud, plaintiffs 313 must allege that Deloitte made misrepresentations that were material. Basic, 485 U.S. at 238, 108 S. Ct. 978. A statement or omission is material if there is "a substantial likelihood" that it "would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976). The question of materiality "may be characterized as a mixed question of law and fact," TSC Indus., 426 U.S. at 450, 96 S. Ct. 2126, and is generally inappropriate for determination at the pleading stage of litigation, see Ganino v. Citizens Utilities Co., 228 F.3d 154, 166 (2d Cir.2000) ("We believe it is inappropriate to determine at this stage of the litigation that [overstatement of income by 17.7% after tax and 11.7% pre-tax for a given quarter, and of 11.9% after tax and 8% pre-tax for a period of six months], both in absolute terms and as percentages of total net income ... were immaterial as a matter of law."); see also Oleck v. Fischer, No. 73 Civ. 1460(CSH), 1979 WL 1217, at 13 (S.D.N.Y. June 8, 1979) ("Nondisclosed facts are not viewed in isolation. Materiality depends upon all the circumstances of the case."). According to the amended complaint, Deloitte discovered in the fall of 2000 that the audited FY1999 financial statement overstated stockholder equity by $4,131,000 of a total of $563,316,000 and understated accounts payable by $18,424,000. Amend. Compl. ¶¶ 11, 75. Deloitte argues that courts have held comparable errors immaterial as a matter of law. See, e.g., In re Duke Energy Corp. Sec. Litig., 282 F. Supp. 2d 158, 161 (S.D.N.Y.2003) ("[A]n inflation of $217 million in the Company's revenues for the relevant period amounts to about 0.3% of Duke Energy's total revenues for that period [which constitutes] an immaterial percentage as a matter of law."); Parnes v. Gateway 2000, Inc., 122 F.3d 539, 546-47 (8th Cir.1997) (alleged overstatement of assets by 2 percent was immaterial as a matter of law); In re Newell Rubbermaid Inc. Sec. Litig., No. 99 C 6853, 2000 WL 1705279, at 8 (N.D.Ill. Nov.14, 2000) (failure to disclose expenses amounting to less than one percent of overall revenues was immaterial as a matter of law). The alleged overstatement of Warnaco's stockholder equity in the FY1999 financial statement amounted to 0.73 percent. The complaint provides no indication of the relative measure of the understatement of accounts payable attributable to Designer Holdings allegedly made in the FY1999 financial statement. If that understatement was of comparably small proportion, Deloitte's argument that it had no duty to correct the Designer Holdings errors is not without merit. However, since, as discussed below, plaintiffs fail to allege loss causation with respect to Deloitte's failure to correct these errors, I need not decide whether the errors were immaterial as a matter of law. Plaintiffs also seek to hold Deloitte responsible for falsehoods contained in quarterly financial statements issued by Warnaco during the class period. Although the amended complaint alleges that these statements contained a notation that they were unaudited, plaintiffs contend that they are attributable to Deloitte because Deloitte "examined and reviewed" them.[2] 314 In Central Bank v. First Interstate Bank, 511 U.S. 164, 114 S. Ct. 1439, 128 L. Ed. 2d 119 (1994), the Supreme Court held that a plaintiff cannot bring a claim for aiding and abetting securities fraud under Section 10(b). In Shapiro, the Second Circuit, observed that "[i]f Central Bank is to have any real meaning, a defendant must actually make a false or misleading statement in order to be held liable under Section 10(b). Anything short of such conduct is merely aiding and abetting, and no matter how substantial that aid may be, it is not enough to trigger liability under Section 10(b)." Shapiro, 123 F.3d at 720. Accordingly, liability may not generally attach to a public auditor for unaudited public statements the company made, which is the case with Warnaco's quarterly statements. See Wright, 152 F.3d at 175 ("[Company's] press release did not attribute any assurances to Ernst & Young and, in fact, did not mention Ernst & Young at all. Thus, Ernst & Young neither directly nor indirectly communicated misrepresentations to investors."); Shapiro, 123 F.3d at 721 (noting that "if an accountant does not issue a public opinion about a company, although it may have conducted internal audits or reviews for portions of the company, the accountant cannot subsequently be held responsible for the company's public statements issued later merely because the accountant may know those statements are likely untrue") (quoting In re Cascade, 894 F.Supp. at 443); In re Rent-Way Sec. Litig., 209 F. Supp. 2d 493, 504 (W.D.Pa.2002) (allegations of misstatements in unaudited quarterly statements that did not identify auditor by name were insufficient to state a claim under Section 10(b)); In re Kendall Square Research Corp. Sec. Litig., 868 F. Supp. 26, 28 (D.Mass.1994) ("[A]llegations that Price Waterhouse reviewed and approved the quarterly financial statements and the Prospectuses do not constitute the making of a material misstatement; at most, the conduct constitutes aiding and abetting and is thus not cognizable under Section 10(b)."). Plaintiffs' reliance on In re Global Crossing, Ltd. Securities Litigation, 322 F. Supp. 2d 319 (S.D.N.Y.2004) is unavailing. In that case, the plaintiffs sought to attribute to Arthur Andersen unaudited statements which they alleged Andersen materially assisted in preparing. The Court accepted the plaintiffs' argument with respect to some statements, but rejected it as to others. It observed that to hold an auditor responsible for statements it did not itself make, a plaintiff must allege "sufficient facts that demonstrate that a defendant was personally responsible for making those statements, even if he or she is not identified as the speaker." Global Crossing, 322 F.Supp.2d at 331. The Court then held that "[a]llegations that Andersen `prepared, directed or controlled,' `helped create' or `materially assisted in' preparing false statements issued by Global Crossing place its involvement well beyond the realm of `aiding and abetting' liability precluded by Central Bank." Id. at 334. Even if substantial participation in preparation of an unaudited statement is sufficient for primary liability under Section 10(b),[3] plaintiffs do not allege such participation 315 by Deloitte in this case. All that plaintiffs allege is that Deloitte "examined and reviewed" the quarterly statements, and that it attended quarterly review meetings. These allegations do not rise to the level of involvement deemed sufficient in Global Crossing. See id. at 333 (allegations that accountant "merely reviewed and approved" unaudited statements or was "instrumental in helping" company prepare them are insufficient to transcend the proscribed category of aiding and abetting liability under Section 10(b)). Plaintiffs also seek to hold Deloitte responsible for failing to disclose a substantial understatement of reserves for returned merchandise in the FY1999 financial statement. According to the amended complaint, in mid-February 2000 Deloitte discovered that Warnaco had understated the value of such reserves by $26,000,000. Amend. Compl. ¶¶ 59-60, 75. Neither Deloitte nor Warnaco disclosed this fact, however, until March 29, 2001, following the commencement of an SEC investigation into Warnaco's finances. Id. ¶ 60. Warnaco's stock price declined after the corrective disclosure was made. Id. ¶ 4. This alleged omission is not actionable in this case. The amended complaint expressly states that Deloitte discovered the understatement in mid-February 2000, but failed to disclose it in the FY1999 financial statement. Both events took place before the class period. Since plaintiffs do not allege that Deloitte discovered the falsehood within the class period, they cannot maintain a claim against Deloitte for failing to correct. Cf. In re Int'l Bus. Machs. Corporate Sec. Litig., 163 F.3d 102, 107 (2d Cir.1998) ("[A defendant] is liable only for those statements made during the class period."). Were plaintiffs permitted to do so, all knowing misstatements made before the class period, which remain uncorrected, would be actionable within the class period on an omission theory. Plaintiffs also allege that Deloitte failed to publicly disclose in October 2000 that Warnaco was no longer in compliance with its debt covenants. Amend. Compl. ¶ 173. The amended complaint, however, does not allege facts showing that Deloitte had a duty to disclose this information. First, there is no allegation that Deloitte was aware that Warnaco was in default under its credit agreement. Although plaintiffs allege that the true numbers for Warnaco's cash and long term indebtedness were made known to Deloitte by November 3, 2000, and issued in a press release the day before, they also allege that Warnaco changed those numbers before issuing the false interim statement on November 14, 2000. There is no allegation that Deloitte knew that Warnaco's changed numbers were fictitious. Moreover, even had Deloitte discovered that Warnaco was in default, there is no allegation that Deloitte made a contrary prior statement that it had a duty to correct within the class period. The fact that Warnaco defaulted under its credit agreements in October 316 2000 did not render any of Deloitte's prior statements false, thereby giving rise to a duty to correct. In addition, Deloitte had no duty to correct Warnaco's false November 14, 2000 quarterly statement, which it did not audit. See Wright, 152 F.3d at 175; IIT, 619 F.2d at 927. Finally, plaintiffs argue that Deloitte is responsible for the misstatements made in the FY2000 financial statement. This statement is alleged to have been audited by Deloitte and to have contained numerous significant falsehoods. See Amend. Compl. ¶ 160. Deloitte responds that, because its audit opinion included a "going concern" qualification, the financial statement as a whole could not, as a matter of law, be deemed misleading. Deloitte cites no authority for the proposition that a "going concern" qualification insulates a public auditor from any liability for material misstatements made in conjunction with the qualification. But see Drabkin v. Alexander Grant & Co., 905 F.2d 453, 455-56 (D.C.Cir.1990) ("Issuing a going concern opinion may not insulate an accounting firm from liability but it must cut strongly in its favor.") (citation omitted); see also In re Spiegel, Inc. Sec. Litig., 382 F. Supp. 2d 989, 1037 (N.D.Ill.2004) ("Nor is [accounting firm] entitled to dismissal because it threatened to issue a going concern statement in the 2001 Form 10-K and `never backed down.'"). Although the fact finder may determine that the financial statement as a whole was not misleading, it cannot be so deemed as a matter of law solely by reason of Deloitte's "going concern" qualification. B. Loss Causation Thus, the only actionable misstatements and omissions in the amended complaint are Deloitte's failure to disclose the Designer Holdings errors, and the misstatements in the FY2000 financial statement. Plaintiffs, however, fail to plead loss causation with respect to either. An essential element of a claim for securities fraud is loss causation. Dura Pharm., Inc. v. Broudo, ___ U.S. ___, 125 S. Ct. 1627, 1629, 161 L. Ed. 2d 577 (2005). This requirement is codified in the PSLRA, which provides that "[i]n any private action arising under this chapter, the plaintiff shall have the burden of proving that the act or omission of the defendant alleged to violate this chapter caused the loss for which the plaintiff seeks to recover damages." 15 U.S.C. § 78u-4(b)(4). A securities fraud plaintiff "must allege both transaction loss, i.e., that but for the fraudulent statement or omission, the plaintiff would not have entered into the transaction; and loss causation, i.e., that the subject of the fraudulent statement or omission was the cause of the actual loss suffered." Suez Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 96 (2d Cir.2001) (emphasis in original). The Supreme Court has recently rejected the theory that artificial inflation of a security's purchase price is, without more, sufficient to establish loss causation.[4]See Dura Pharm., 125 S.Ct. at 1629. Such a theory, the Court observed, "would allow recovery where a misrepresentation leads to an inflated purchase price but nonetheless does not proximately cause any economic loss." Id. at 1633; see also Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 186 (2d Cir.2001) ("The loss causation requirement is intended to fix a legal limit on a person's responsibility, even for wrongful acts."). 317 Although the Supreme Court observed that "it should not prove burdensome for a plaintiff who has suffered an economic loss to provide a defendant with some indication of the loss and the causal connection that the plaintiff has in mind," Dura Pharm., 125 S.Ct. at 1634, it did not specifically explain what allegations would suffice to plead loss causation. In Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir.2005), the Second Circuit addressed that issue. The Court held that a plaintiff can plead loss causation by alleging either that (1) "the market reacted negatively to a corrective disclosure regarding the falsity" of the defendant's misstatements, or (2) that the defendant "misstated or omitted risks that did lead to the loss." Lentell, 396 F.3d at 175; see also Fogarazzo v. Lehman Bros., Inc., No. 03 Civ. 5194(SAS), 2004 WL 1151542, at 10 (S.D.N.Y. May 21, 2004) (it is "enough that (1) the misrepresentation artificially inflated the value of the security, or otherwise misrepresented its investment quality, and (2) the subject of the misrepresentation caused the decline in the value of the security"). The amended complaint alleges that, as a result of Deloitte's misrepresentations and omissions, "plaintiffs and other members of the Class acquired Warnaco common stock during the Class Period at artificially inflated high prices and were damaged thereby." Amend. Compl. ¶ 353. As noted, the mere artificial inflation of Warnaco's stock price is insufficient to plead loss causation. The amended complaint further alleges, however, that as a result of Deloitte's conduct "Warnaco was not shut down in early October 2000 when, in reality, it was in clear default on its credit agreements." Id. ¶ 4. Plaintiffs also allege that in April 2001, Deloitte failed to publicly disclose "the financial chaos within Warnaco," and that Warnaco's "true financial condition and internal chaos ... prevented [it] from obtaining waivers from its lenders of its default on its credit agreement during March June 2001, caused its stock price to decline to almost zero, and forced Warnaco to file for bankruptcy protection on June 11, 2001." Id. With respect to Deloitte's failure to disclose the Designer Holdings errors, the amended complaint contains no allegations that these errors, which Deloitte discovered in the fall of 2000 and which were publicly corrected after Warnaco's bankruptcy, played any part in the fall of Warnaco's stock price or the company's ultimate demise. The only loss causation allegation for the period prior to April 2001 is that "Warnaco was not shut down in early October 2000" when it allegedly should have been because it was in default under its credit agreements. As already discussed, however, Deloitte was under no duty to disclose Warnaco's default since it is not alleged to have made a prior contrary statement or to have known that Warnaco's published numbers, which indicated it was not in default, were fabricated. As for the falsehoods contained in the FY2000 financial statement, plaintiffs allege that Deloitte's misrepresentations caused their loss because "Warnaco's true undisclosed financial condition rendered Warnaco unable to obtain waivers and caused it to have to file for bankruptcy." Id. ¶ 169. Under Second Circuit law, however, this allegation is insufficient to plead loss causation. To plead that Deloitte's misstatements and omissions in the FY2000 financial statement caused their loss, plaintiffs must allege facts establishing that Deloitte concealed "some or all of the risk that materialized." Lentell, 396 F.3d at 177. Here, that risk, according to the amended complaint, 318 was Warnaco's inability to obtain permanent waivers from its creditors, which pushed the company into bankruptcy. Amend. Compl. ¶ 169. That risk, however, was unambiguously disclosed in Deloitte's audit opinion accompanying the FY2000 financial statement. Deloitte warned that Warnaco "was not in compliance with certain covenants and has a working capital deficiency," and that it may therefore not be able to carry on as a going concern. In Lentell, the Second Circuit specifically addressed the question of what a plaintiff must allege to plead loss causation where the allegedly fraudulent statement itself disclosed the risk of loss that ultimately materialized: [W]here (as here) substantial indicia of the risk that materialized are unambiguously apparent on the face of the disclosures alleged to conceal the very same risk, a plaintiff must allege [in order to plead loss causation] (i) facts sufficient to support an inference that it was defendant's fraud rather than other salient factors that proximately caused plaintiff's loss; or (ii) facts sufficient to apportion the losses between the disclosed and concealed portions of the risk that ultimately destroyed an investment. Id. 396 F.3d at 177. Here, plaintiffs have alleged neither. The amended complaint contains no allegations relating to the apportionment of plaintiffs' losses between the disclosed and concealed portions of the risk that materialized. Nor do plaintiffs allege any facts from which it may be inferred that Deloitte's failure to unmask the full depth of Warnaco's troubles in the FY2000 financial statement contributed to Warnaco's inability to obtain waivers or Warnaco's ultimate demise. Plaintiffs' assertion that "Warnaco's true undisclosed financial condition rendered Warnaco unable to obtain waivers" is conclusory and does not allege any facts in its support. It is insufficient "to support an inference that it was defendant's fraud rather than other salient factors that proximately caused plaintiff's loss." Id. II. Breach of Fiduciary Duty Deloitte also moves to dismiss plaintiffs' claim of breach of fiduciary duty. An accounting firm retained to audit the financial statement of a company does not stand in a fiduciary relationship with that company's shareholders.[5]See Tal v. Superior Vending, LLC, 20 A.D.3d 520, 799 N.Y.S.2d 532, 533 (2d Dep't 2005) (accountant who rendered services to corporation owed no fiduciary duty to a fifty percent shareholder in corporation); Hamer v. Chessman, 129 A.D.2d 491, 514 N.Y.S.2d 243, 244 (1st Dep't 1987) (same); Facchini v. Miller, No. CV XXXXXXXXXS, 2000 WL 175580, at 4 (Conn.Super.Ct. Jan.31, 2000) (accountant owed no fiduciary duty to plaintiff shareholder who merely alleged reliance on financial information generated by accountant); see also BHC Interim Funding, L.P. v. Finantra Capital, Inc., 283 F. Supp. 2d 968, 987 (S.D.N.Y.2003) ("[W]hen the allegedly aggrieved party is at best a third party to an accountant-client relationship, and no commercial transaction is executed between two parties indeed, when no relationship whatsoever exists between two parties no fiduciary duties may be imposed on either party.") (quoting Greenblatt v. Richard Potasky Jewelers, No. 93 Civ. 3652(LMM), 319 1994 WL 9754, at *4 (S.D.N.Y. Jan 13, 1994)). The complaint therefore fails to state a claim against Deloitte for breach of fiduciary duty. CONCLUSION For the foregoing reasons, Deloitte's motion to dismiss the complaint is granted. SO ORDERED. NOTES [1] The amended complaint is unclear as to whether Deloitte became aware in the fall of 2000 of the full extent of the Designer Holdings errors, or only the $4,131,000 error attributable to misreporting of intercompany account balances. Compare Amend. Compl. ¶ 132 ("[B]y November 2000, Deloitte knew that Warnaco's intercompany accounts with Designer Holdings were out of balance and that Warnaco's financial condition was potentially inflated as a result."), with id. ¶ 136 (alleging that "the Designer Holdings related errors" were discussed in the third quarter 2000 audit review meeting, which Deloitte attended). For the purpose of this motion, this ambiguity is construed in plaintiffs' favor. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002). [2] Plaintiffs fail to allege that the audited annual statements were "incorporated by reference" into Warnaco's quarterly statements, rendering Deloitte responsible for the latter. The fact that the quarterly statements referred investors "for further information" to the audited annual statements is insufficient for incorporation by reference. See Markewich v. Adikes, 422 F. Supp. 1144, 1147 (E.D.N.Y.1976); see also 17 C.F.R. § 240.12b-23(a)(3) (requiring, for incorporation by reference into Form 10-Q, that "copies of any information or financial statement incorporated into a registration statement or report by reference, or copies of the pertinent pages of the document containing such information or statement, shall be filed as an exhibit to the statement or report"). [3] As the Court in Global Crossing recognized, the leading cases from the Second Circuit adopted a `bright line' test over a `substantial participation' test for the threshold required for a secondary actor's conduct to implicate primary liability under Section 10(b). See Wright, 152 F.3d at 175; Shapiro, 123 F.3d at 720. Although the Court opined that a subsequent decision has moved toward the `substantial participation' test, that case involved, as the Court recognized, a corporate insider rather than an outside actor like a public auditor. See In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 75-76 (2d Cir.2001) (company vice president could be liable for misstatements disseminated by the company where he "was primarily responsible" for communications with investors and analysts and was "involved in the drafting, producing, reviewing and/or disseminating of the false and misleading statements"). As was also noted in Global Crossing, the In re Scholastic opinion discusses neither Wright, Shapiro, nor Central Bank. [4] This was the law of this Circuit even before Dura Pharmaceuticals. See Emergent Capital Inv. Mgmt., LLC v. Stonepath Group, Inc., 343 F.3d 189, 198 (2d Cir.2003). [5] Both parties have cited authorities from New York and Connecticut on this issue. Because there is no substantive difference between the laws of these jurisdictions, no choice of law question arises. See Int'l Bus. Machs. Corp. v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir.2004) ("Choice of law does not matter ... unless the laws of the competing jurisdictions are actually in conflict.").	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1678770/	31 F.Supp. 540 (1940) MILLER v. RIVERS, Governor, et al. No. 24. District Court, M. D. Georgia, Valdosta Division. February 19, 1940. 541 Jas. A. Branch, of Atlanta, Ga., Franklin & Eberhardt, of Valdosta, Ga., and J. P. Knight, of Nashville, Ga., for plaintiff. There was no appearance for defendants. DEAVER, District Judge. E. D. Rivers is Governor of the State of Georgia, and is a resident, citizen, and inhabitant of Lanier County, Georgia. John E. Stoddard is Adjutant-General of the State of Georgia, and is a resident, citizen and inhabitant of Fulton County, Georgia. W. L. Miller, the plaintiff, is a citizen of the State of Georgia and of the United States. The plaintiff, W. L. Miller, was duly appointed and commissioned as chairman of the State Highway Board of Georgia, for a term beginning March 3, 1937 and ending February 1, 1943. The office of chairman of the State Highway Board of Georgia is an office created by the laws of Georgia, and the salary of said office is $5,400 per annum. On December 2, 1939 the defendant, E. D. Rivers, Governor of the State of Georgia, undertook to remove the plaintiff, W. L. Miller, as chairman of the State Highway Board of Georgia, by an order issued on that date. On December 2, 1939 the defendant, E. D. Rivers, Governor of Georgia, undertook, by an order issued on said date, to appoint Lawson L. Patten to the office of the State Highway Board of Georgia, in place of W. L. Miller, the plaintiff. On December 2, 1939 the defendant, E. D. Rivers, Governor of Georgia, issued an order directing that the plaintiff, W. L. Miller, be ousted and removed from the room in the Highway Building, which room had been assigned to and was then occupied by the said plaintiff, W. L. Miller, 542 as the office of the chairman of the Highway Board of Georgia, and the said defendant, E. D. Rivers, Governor of Georgia, at the same time ordered that said room be assigned to Lawson L. Patten as chairman of the Highway Board of Georgia. On December 2, 1939 certain persons, to-wit, Marvin S. Griffin, Clay Camp and W. C. Grimes, acting under and pursuant to an order of the defendant, E. D. Rivers, Governor of Georgia, forcibly and violently removed the plaintiff, W. L. Miller, from said room in said Highway Building and from said Highway Building. Following the removal of the said plaintiff, W. L. Miller, from said room and from said Highway Building on the night of December 2, 1939, the plaintiff, W. L. Miller, in the early morning of December 4, 1939 applied to the Superior Court of Lanier County, Georgia, for a restraining order and injunction against Lawson L. Patten, Marvin S. Griffin, Clay Camp and W. C. Grimes to restrain and enjoin them from interfering with, molesting, or obstructing the said plaintiff, W. L. Miller, in the occupancy of said room in said Highway Building, and from interfering with, molesting, obstructing or impeding him, the said W. L. Miller, in the performance of the duties of the office of chairman of the State Highway Board of Georgia, and from interfering with the said W. L. Miller in the possession, custody and control of the books, records and documents appertaining to the office of the chairman of the State Highway Board of Georgia, which were in the possession and under the custody and control and supervision of the said plaintiff, W. L. Miller, as such chairman. Upon the presentation of said petition mentioned and described in the preceding paragraph hereof, a restraining order was granted by the Judge of the Superior Court of said Lanier County, Georgia, restraining the said Lawson L. Patten, Marvin S. Griffin, Clay Camp, and W. C. Grimes, their agents, confederates, employees, and all persons acting for them or in conjunction with them from interfering with, molesting or obstructing the said W. L. Miller in the performance of the duties of the office of chairman of the State Highway Board of Georgia, and from interfering with the said W. L. Miller in the occupancy of said room in said State Highway Building, and from interfering with, obstructing or in any manner molesting the said W. L. Miller in the possession, custody and control of the records, books and documents in his possession or under his custody and control as chairman of the State Highway Board of Georgia. On December 7, 1939, after said restraining order mentioned and described in the preceding paragraph hereof had been granted, and after due notice thereof had been given to said parties, Lawson L. Patten, Marvin S. Griffin, Clay Camp, and W. C. Grimes, the said plaintiff, W. L. Miller, was again by force and violence employed by certain persons, including the said Marvin S. Griffin, removed from said room and denied the occupancy thereof and the possession, custody and control of the books, records and documents appertaining to the office of chairman of the State Highway Board of Georgia, which were then and had been in the possession and under the custody and control of the said W. L. Miller as such chairman. On December 16, 1939 an interlocutory injunction was granted in said cause in the Superior Court of Lanier County, Georgia, against said Lawson L. Patten, Marvin S. Griffin, Clay Camp and W. C. Grimes, who had been duly served and who appeared and were represented at said interlocutory hearing; said interlocutory injunction by its terms enjoining them, the said Patten, Griffin, Camp and Grimes, and each of them, their agents, employees, servants and confederates and all persons acting for them or in conjunction with them, from interfering with, molesting or impeding the said plaintiff, W. L. Miller, in the performance of the duties of the office of chairman of the State Highway Board of Georgia, and in the occupancy of said room in said State Highway Building, which had been assigned to the said plaintiff and had been used by him as the office of the chairman of said State Highway Board of Georgia, and from interfering with the said W. L. Miller in the possession, custody and control of the books, records and documents appertaining to the office of chairman of the Highway Board of Georgia, and which were in the possession of or under the custody and control of the said W. L. Miller as said chairman. On December 18, 1939 the said E. D. Rivers, Governor of Georgia, issued a proclamation purporting to declare martial law in and around the Highway Department Building of the State of Georgia, and ordering 543 John E. Stoddard, as Adjutant-General of the State of Georgia, to place officers and men of the National Guard on duty and to establish military control over all the property and premises of said State Highway Department of Georgia, and to maintain such military control against all orders whatsoever until further ordered by the Governor. On December 21, 1939 the Superior Court of Lanier County, with three judges presiding in a quo warranto proceeding, adjudicated that W. L. Miller is the legally appointed and qualified chairman of the Highway Board of Georgia and is entitled to have said office and to exercise the duties and to receive the emoluments of said office. On December 21, 1939, the same court granted a mandamus absolute requiring Herman Watson and Lawson L. Patten as members of the Highway Board to recognize W. L. Miller as a member of said Board and to recognize W. L. Miller as chairman of said Board. The purpose of said proclamation purporting to declare martial law and to establish military control over said State Highway Building and property was to prevent the plaintiff, W. L. Miller, from being permitted to perform the duties of the office of chairman of the State Highway Board of Georgia and from being permitted to occupy any portion of said State Highway Building, as chairman of said State Highway Board, and from being permitted to have and retain the possession, custody and control of the books, records and documents appertaining to said office of chairman of the State Highway Board of Georgia, and to obstruct and prevent the execution of the judgment of the Superior Court of Lanier County, Georgia, granted in said cause on December 16, 1939, as set forth and described in paragraph 13 of these findings. Acting under and pursuant to said proclamation purporting to declare martial law, as set forth in paragraph 14 of these findings, the defendant, John E. Stoddard, as Adjutant-General of the State of Georgia, and officers and men under his command as such Adjutant-General, assumed to and did establish military control over said State Highway Building and property of the State Highway Department of Georgia located therein, and prevented the plaintiff, W. L. Miller, from having access to or the occupancy of said State Highway Building or any portion thereof in the capacity of chairman of said State Highway Board of Georgia, and from performing or attempting to perform the duties of the office of chairman of said State Highway Board of Georgia. On January 4, 1940 the said plaintiff, W. L. Miller, filed an amendment and supplemental petition in said cause in the Superior Court of Lanier County, hereinbefore described, in which said amendment and supplemental petition the said John E. Stoddard, Adjutant-General of the State of Georgia, and J. H. Skelton, a Lieutenant-Colonel of the Georgia State Militia, were named as parties defendant in said cause in the Superior Court of Lanier County, and in said amendment and supplemental petition it was prayed that the said Stoddard, Adjutant-General of the State of Georgia, and said Skelton, Lieutenant-Colonel as aforesaid, and all persons acting under them, be restrained and enjoined from interfering with, molesting or in any way obstructing the said plaintiff, W. L. Miller, in the performance of the duties of the office of chairman of the State Highway Board of Georgia, and from interfering with, molesting or obstructing said plaintiff, W. L. Miller, in the use and occupancy of the room in said State Highway Building, which had been assigned to and occupied by the said W. L. Miller as chairman of said State Highway Board of Georgia, and in the free access to said State Highway Building and the books, records and documents of said State Highway Department of Georgia. A restraining order was granted on said amendment and supplemental petition mentioned and described in the preceding paragraph of these findings, restraining the said John E. Stoddard, Adjutant-General of the State of Georgia, and the said J. H. Skelton, Lieutenant-Colonel, and all persons acting in conjunction with them or under orders and directions from them, from interfering with, obstructing or molesting the said W. L. Miller in the performance of his duties as chairman of said State Highway Board of Georgia, and restraining said Stoddard, Adjutant-General, and said Skelton, Lieutenant-Colonel, from preventing and attempting to prevent said W. L. Miller from entering and occupying the said State Highway Building and the office therein, which had been assigned to and occupied by the said W. L. Miller as chairman of said State Highway Board, and from having full and free access to the 544 books, records and documents of the Highway Department in said building. After the said John E. Stoddard, Adjutant-General of the State of Georgia, and the said J. H. Skelton, Lieutenant-Colonel, had been duly served with said amendment, supplemental petition and said restraining order, the said John E. Stoddard, Adjutant-General of the State of Georgia, and the said J. H. Skelton, Lieutenant-Colonel, did interfere with the said plaintiff, W. L. Miller, in the performance of his duties as chairman of the said State Highway Board of Georgia, and did prevent the said W. L. Miller from having access to and occupancy of the said State Highway Building and the room therein which had been assigned to and had been occupied by the said W. L. Miller as chairman of said State Highway Board, and from having access to the books, records and documents, in direct violation and defiance of said restraining order which had been granted on said amendment and supplemental petition, and which has been hereinbefore in these findings described. The said John E. Stoddard, Adjutant-General of the State of Georgia, and the said J. H. Skelton, Lieutenant-Colonel as aforesaid, were duly cited for contempt in said cause in the Superior Court of Lanier County, Georgia, and on January 13, 1940, on the hearing of said contempt proceedings, the said John E. Stoddard, Adjutant-General as aforesaid, and the said J. H. Skelton, Lieutenant-Colonel as aforesaid, were adjudged in contempt and judgment was duly entered, ordering the arrest and imprisonment of said John E. Stoddard, Adjutant-General, and the said J. H. Skelton, Lieutenant-Colonel. On January 13, 1940 an interlocutory hearing was had on the said amendment and supplemental petition in said cause in the Superior Court of Lanier County, Georgia, and an interlocutory injunction was granted enjoining said Stoddard, Adjutant-General, and the said Skelton, Lieutenant-Colonel as aforesaid, and all persons acting in conjunction with them or under orders from them, from interfering with, molesting or obstructing said plaintiff, W. L. Miller, in the performance of the duties of the office of chairman of the State Highway Board of Georgia, and from interfering with or molesting the said W. L. Miller in the use and occupancy of the said State Highway Building and the room therein which had been assigned to and which had been occupied by the said W. L. Miller as chairman of said State Highway Board, and from interfering with or molesting him in the use, possession, custody and control of the books, records and documents of the Highway Department of the State of Georgia, which were under the custody and control of the chairman of the State Highway Board. The said judgment granting an interlocutory injunction and the judgment finding and adjudging the said John E. Stoddard, Adjutant-General, as aforesaid, and the said J. H. Skelton, Lieutenant-Colonel, as aforesaid, in contempt of court and enjoining them as set forth in these findings, were judgments of a court having jurisdiction, and said judgments have not been appealed from and no supersedeas of said judgments has been granted. On January 15, 1940 the defendant, E. D. Rivers, Governor of Georgia, issued a proclamation purporting to extend martial law to cover the Military Department of the State of Georgia, and ordering that the said John E. Stoddard, Adjutant-General of the State of Georgia, place officers and men of the National Guard to establish military control over all the property and premises of the Military Department of the State of Georgia, and to maintain such military control against all orders whatsoever until further ordered by the Governor. On January 15, 1940 the said E. D. Rivers, Governor of Georgia, issued orders purporting to grant a full, complete and unconditional pardon to each, the said John E. Stoddard, Adjutant-General of the State of Georgia, and the said J. H. Skelton, Lieutenant-Colonel of the Georgia State Militia, "for the offenses and sentences imposed" upon them in said contempt proceedings in the Superior Court of Lanier County, Georgia on January 13, 1940, as hereinbefore in these findings set out. The purpose and object of the said E. D. Rivers in issuing said proclamation purporting to extend martial law, as hereinbefore set out, and in purporting to pardon the said John E. Stoddard, Adjutant-General, and the said J. H. Skelton, Lieutenant-Colonel, was to obstruct and prevent the execution of the judgments granted in said cause in the Superior Court of Lanier County, as set out in these findings, and to prevent the plaintiff, W. L. Miller, from being allowed to perform the duties of the office of chairman of the State Highway Board of Georgia, and to have the use and 545 occupancy of the office of the chairman in the Highway Buiding of the State of Georgia, and to attempt to carry out and effectuate the plan and purpose of the said E. D. Rivers, Governor of the State of Georgia, to remove the said W. L. Miller as chairman from the office of chairman of the State Highway Board of Georgia, and to deny to the said W. L. Miller the relief and the protection of the rights adjudicated and decreed in his favor by said judgments. The effect of the actions of the said E. D. Rivers, Governor of Georgia, and the said John E. Stoddard, Adjutant-General of Georgia, as set out in these findings of fact, has been to obstruct and prevent the execution of the judgments rendered in said cause in the Superior Court of Lanier County, Georgia, in favor of the said W. L. Miller, plaintiff, and said acts and conduct are continuing to obstruct and prevent the execution and enforcement of said judgments and will continue to do so unless enjoined. There was no condition of riot, insurrection, war, invasion or disorder or other condition which rendered necessary the establishment of military control over the Highway Department of the State of Georgia, or which rendered the civil authorities of the State of Georgia unable to preserve peace and to enforce the judgments of the courts of the State of Georgia, and the sole purpose of the efforts of the said E. D. Rivers, Governor of Georgia, to establish military control was to prevent the enforcement of the judgments rendered in said cause in the Superior Court of Lanier County in favor of the plaintiff, W. L. Miller. The courts were open and functioning and there was no break-down of the courts or the civil authorities, except as they were obstructed and interfered with by the said E. D. Rivers, Governor of Georgia, and those acting in conjunction with him and under orders from him. The Sheriff of Fulton County, Georgia undertook, in compliance with the order granted by the Superior Court of Lanier County, Georgia, in said contempt proceedings against the said John E. Stoddard, Adjutant-General, and the said J. H. Skelton, Lieutenant-Colonel, as hereinbefore set out, to execute said judgment in said contempt proceeding, but was prevented from doing so by threats of force and by intimidation, and by notifying the Sheriff that arrest would be resisted with all military force necessary to prevent it. The said E. D. Rivers, Governor of Georgia, and the said John E. Stoddard, Adjutant-General of Georgia, in their acts and conduct as set out in these findings of fact, have been and are acting under color of State authority as Governor and as Adjutant-General of said State, respectively, and the acts of said defendants in said matters are arbitrary, capricious and oppressive. The value of the matter in controversy in this cause exceeds the sum of three thousand dollars ($3,000), exclusive of interest and costs. The judgments rendered in said cause in the Superior Court of Lanier County, Georgia, as set forth and described in these findings of fact, are judgments of a court having jurisdiction of the parties and subject matter, and were rendered after due and legal service. The Court has jurisdiction over this suit under Section 24(1) of the Judicial Code (28 U.S.C.A. § 41(1), and under Section 24(14) of the Judicial Code (28 U.S.C. A. § 41(14), and under 8 U.S.C.A. § 43. The office of chairman of the State Highway Board of Georgia is an office created by the laws of Georgia, for a fixed and definite term of office. The Governor of the State of Georgia has no power to remove the chairman of the State Highway Board of Georgia during the term of office of such chairman. The action of the defendant, E. D. Rivers, Governor of Georgia, in attempting to remove the plaintiff, W. L. Miller, as chairman of the State Highway Board of Georgia, was beyond the power of the said defendant, and was illegal and void. Under the laws of Georgia, the chairman of the State Highway Board of Georgia cannot be removed from his office or deprived of the right to fill said office and exercise the duties thereof and receive the emoluments thereof during his term of office, by the Governor, or by any tribunal, without notice and an opportunity of being heard, and a removal of such officer without such notice and opportunity of being heard would amount to a denial of due process of law and equal protection of the law. The rights of plaintiff to hold his office and to perform the duties thereof unmolested have been adjudicated by the State Court by judgments not reversed or set aside and those judgments constitute the 546 law of the case as to those matters and are recognized as such by this court. The proof has established a cause of action in favor of the plaintiff, W. L. Miller, in this case, under the due process and equal protection clauses of the Fourteenth Amendment of the Constitution of the United States, U.S.C.A., and under 8 U. S.C.A. § 43. The acts of the defendants, E. D. Rivers, Governor of the State of Georgia, and John E. Stoddard, Adjutant-General of the State of Georgia, as set out in the findings of fact, are in violation of the equal protection and due process clauses of the Fourteenth Amendment of the Constitution of the United States, and amount to a deprivation of the rights of the plaintiff, W. L. Miller, under the provisions of 8 U.S.C.A. § 43. The plaintiff, W. L. Miller, has no full, adequate and complete remedy at law. The judgments rendered in the contempt proceeding against John E. Stoddard, Adjutant-General of the State of Georgia, and J. H. Skelton, Lieutenant Colonel, as aforesaid in said cause, in the Superior Court of Lanier County, Georgia, were for civil contempt, and the Governor of Georgia had no power or authority to grant pardons for such civil contempt, and his efforts to pardon the said Stoddard and the said Skelton in furtherance of his plan and purpose to obstruct the execution of the processes and judgments of the Court amounted to denying the plaintiff, W. L. Miller, due process and equal protection of the law. The plaintiff is entitled to an interlocutory injunction against said defendants, E. D. Rivers, Governor of the State of Georgia, and John E. Stoddard, Adjutant-General of the State of Georgia, in terms and form as granted in the judgment and decree.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2246997/	590 F. Supp. 1361 (1984) GRANITE ROCK COMPANY, a corporation, Plaintiff, v. CALIFORNIA COASTAL COMMISSION, an administrative agency of the State of California, et al., Defendants. No. C-83-5137-WWS. United States District Court, N.D. California. May 21, 1984. 1362 1363 Barbara R. Banke, Goldstein, Barceloux & Goldstein, San Francisco, Cal., for plaintiff. Linus Masouredis, San Francisco, Cal., for defendants. 1364 MEMORANDUM OF OPINION AND ORDER SCHWARZER, District Judge. This action presents important questions of statutory interpretation and federal preemption arising from the interrelationship among two federal statutes, the Coastal Zone Management Act, 16 U.S.C. §§ 1451 et seq. ("CZMA") and the Mining Act of 1872, 30 U.S.C. §§ 21 et seq. ("Mining Act"), federal regulations issued by the National Forest Service, 36 C.F.R. §§ 228.1 et seq. (1983), and a state statute, the California Coastal Act, Cal.Pub.Res.Code §§ 30000 et seq. ("CCA"). At issue is whether plaintiff Granite Rock Company must secure a permit from the California Coastal Commission ("CCC") to implement its Plan of Operations, already approved by the Forest Service, for open-pit limestone mining on federally-owned property in Los Padres National Forest. Plaintiff seeks (1) to enjoin defendant officials of the CCC[1] from compelling it to comply with the permit requirement of the CCA and (2) to obtain corresponding declaratory relief under 28 U.S.C. § 2201. It claims that the CZMA, under the auspices of which the CCA was enacted, expressly excludes federally-owned lands from the coastal zone and that application of the CCA to its mining operations is preempted by the Mining Act and the Forest Service Regulations. Defendant CCC officials answer that the CZMA and thus the CCA do not exclude land over which the federal government's discretion is limited by the unique property rights granted by the Mining Act to holders of patentable mining claims. Defendants further contend that the Mining Act cannot preempt the CCA which is enacted "pursuant to" the federal CZMA. Finally, they argue that even if all federal land is excluded from the coastal zone, neither the Mining Act nor the CZMA preempts the state's inherent police power to regulate private mining activity on federal land. Both parties agree that there are no material facts in dispute, and plaintiff has moved for summary judgment. I. BACKGROUND. Because of the complex web of statutes and regulations at issue in this action, it is helpful at the outset to briefly note their major provisions. A. The Mining Act. The Mining Act grants private citizens the right to enter federal lands to explore for mineral deposits, see 30 U.S.C. § 22. Until a person has located a valuable mineral deposit, he has a limited possessory interest in the land he occupies against third parties but not against the United States; the government may bar entry to such person at any time. A person who locates a valuable mineral deposit acquires a significantly more substantial interest in the surface land as long as he properly stakes a claim and complies with other statutory requirements, see id. § 26. For example, the claim holder must prepare locational records and must expend at least $100 of labor on the claim each year, id. § 28. If these requirements are met and the claim is thus perfected, its locator "shall have the exclusive right of possession and enjoyment of all the surface included within the lines of their locations," id. § 26, even as against the United States which nevertheless retains title to the land. Finally, the holder of a perfected mining claim may secure a patent to the land by demonstrating his location of a valuable mining claim and complying with other requirements of the Mining Act and regulations enacted thereunder, see 43 C.F.R. §§ 3861.1 et seq. (1983), including payment to the government of $5.00 per acre, 30 U.S.C. § 29. If these requirements are satisfied, issuance by the government of a patent to the land is mandatory, and legal title passes to the patent-holder. 1365 B. Forest Service Regulations. Regulatory power over surface resources of national forest system lands is granted to the Secretary of Agriculture by the Organic Administration Act of 1897, 16 U.S.C. § 471 ("OAA"). Pursuant to that authority, the National Forest Service, a branch of the Department of Agriculture, issued regulations in 1974 governing "use of the surface" of national forest system lands in connection with operations authorized by the Mining Act, 36 C.F.R. § 228.1 (1983). These regulations, which are designed to "minimize [the] adverse environmental impacts" of mining operations on forest land, require that holders of unpatented mining claims submit for approval by the District Ranger a Plan of Operations, id. § 228.4. In addition to describing precisely the scope of the intended operations, the Plan must demonstrate proposed compliance with applicable state and federal environmental standards relating to, among other things, air and water quality, solid waste disposal, preservation of scenic values, and fisheries and wildlife habitat maintenance, id. § 228.8. Operations are then to be conducted in accordance with the approved Plan, id. § 228.5. C. The CZMA. The CZMA, enacted in 1972 and amended in 1976, seeks to preserve and develop the nation's coastal zones, 16 U.S.C. §§ 1451-1452, by providing monetary assistance to states that develop and implement coastal Management Programs consistent with its standards, id. §§ 1451, 1453(g). After the Secretary of Commerce has determined a state program to comply with the requirements set forth in the CZMA, id. §§ 1454-1455, the state receives federal grants of up to 80% of the cost of administering its program, id. § 1455(a). The CZMA envisions state management only of land use within the coastal zone: thus, "Management Program" is defined to include "standards to guide public and private uses of land and waters in the coastal zone," id. § 1453(12), "land use" is defined as "activities which are conducted in, or on the shorelands within, the coastal zone," id. § 1453(10), and the Management Programs are required to include "[a] definition of what shall constitute permissible land uses and water uses within the coastal zone..." id. 1454(b)(2). The "coastal zone" is defined in § 1453(1), the provision at issue in this action, to include coastal waters and adjacent shorelands but excludes "lands the use of which is by law subject solely to the discretion of or which is held in trust by the Federal Government, its officers or agents." The Act also seeks to promote cooperation between federal and state agencies engaged in activities within or affecting the coastal zone. Thus, the CZMA requires a showing of "consistency" with state Management Programs of (1) activities conducted or supported by a Federal agency and "directly affecting the coastal zone," id. § 1456(c)(1), (2) development projects undertaken by a Federal agency in the coastal zone, id. § 1456(c)(2), and (3) activities for which a Federal permit or license is required and which affect land or water uses in the coastal zone, id. § 1456(c)(3)(A). Under the statutory scheme, for example, an activity outside of but affecting the coastal zone by a federal permittee would not be subject to direct regulation by the state's Management Program but would be subject to "consistency review" by the state under § 1456(c)(3)(A). D. The CCA. In 1976 the California legislature enacted the CCA which was approved by the Secretary of Commerce pursuant to the CZMA in 1977. Under the Act, a person wishing to undertake any "development," which is defined to include mining and construction, Cal.Pub.Res.Code § 30106, in the coastal zone must secure a permit from a local or regional commission or the CCC, id. § 30600. The permit shall be issued if the proposed development conforms with the requirements set forth in §§ 30200 et seq. which address such concerns as ocean access, marine and land resources, and scenic and visual qualities. Moreover, the CCA 1366 provides that it shall constitute the state's Management Program for purposes of the CZMA, provided, however, that within federal lands excluded from the coastal zone pursuant to the Federal [CZMA], the State of California shall, consistent with applicable federal and state laws, continue to exercise the full range of powers, rights, and privileges it now possesses or which may be granted, id. § 30008.[2] E. This Action. Plaintiff is presently engaged in commercial mining of a valuable five to seven-acre quarry[3] of high calcium whiting grade limestone on and around Mount Pico Blanco in the Big Sur region of Los Padres National Forest. Although from 1959 to 1980, plaintiff removed relatively small samples of limestone for mineral analysis, it has been extracting substantial amounts since 1981 for purposes of resale to private purchasers. Its mining activity in Big Sur, conceded to be an area of great scenic beauty, includes blasting and opening a quarry, constructing and improving roads, building a bridge, boring test holes and conducting core drilling, improving a water storage system, and dumping rock waste in a disposal area. Although plaintiff has not sought to acquire patents to the land, there is no dispute that it has perfected its mining claims on Mount Pico Blanco by locating a valuable mineral deposit, by complying with locational requirements, and by carrying out at least $100 worth of labor on the claims since 1959. Accordingly, as required by the Forest Service Regulations, plaintiff in 1981 submitted a Plan of Operations for approval by the District Ranger covering the period from 1981 to 1986.[4] In February 1981, after preparation of an Environmental Assessment, plaintiff's Plan was accepted with certain modifications regarding monitoring and mitigation measures and with the proviso that plaintiff be responsible "for obtaining any necessary permits required by State and/or county laws, regulations and/or ordinance." Plaintiff's mining claims clearly lie within the geographic boundaries of the "coastal zone" as defined by the CZMA and the CCA. By a letter of October 17, 1983, the District Director of the CCC informed plaintiff that it needed to secure a permit for its mining operations from the CCC pursuant to the provisions of the CCA. The letter also stated that approval by the Forest Service constituted the granting of a federal permit within the meaning of § 1456(c)(3) of the CZMA and that the Plan of Operations for 1981-1986 was thus subject to "consistency review" by the CCC pursuant to that provision. Plaintiff originally brought this action in October 1983 to enjoin the CCC's officials both from requiring a coastal development permit under the CCA and from requiring consistency review of its Plan of Operations under the CZMA. In its answer, defendants conceded that they had effectively waived the requirement of consistency review by waiting more than six months before notifying the Forest Service of any objections to its approval of the Plan, 16 U.S.C. § 1456(c)(3). Plaintiff now seeks to enjoin only enforcement of the permit requirement; defendants argue that the Court should find that any future Plan of Operations approved by the Forest Service or any amendments to the present Plan must be submitted for consistency review. Although the parties diverge substantially in the way they frame the issues 1367 presented by this action in their papers, the Court concludes that two principal questions are raised. First, does the exclusionary provision of § 1453(1) of the CZMA, incorporated by the CCA in Cal.Pub.Res. Code § 30008, extend to federal lands over which the federal government's discretion is limited by plaintiff's unpatented mining claims? If it does not, is the CCA permit requirement nevertheless preempted by the Mining Act or by the regulations issued by the Forest Service? Because the Court concludes that plaintiff's mining claims are not excluded from the coastal zone and that the CCA permit requirement is not preempted, it need not reach defendants' further contention that the permit requirement is a valid exercise of the state's inherent police power regardless of any exclusion under the CZMA. It also does not reach the applicability of the CZMA's "consistency review" provision to plaintiff's future Plans of Operations, an issue clearly not yet ripe for adjudication. II. EXCLUSIONARY PROVISION OF § 1453(1). Whether the federal land on which plaintiff holds perfected mining claims under the Mining Act is excluded from the provisions of the CZMA and the CCA is a question of interpretation of § 1453(1) of the federal Act. In determining the scope of the exclusionary provision, the Court looks first to its language: "[i]f the statutory language is unambiguous, in the absence of `a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive,'" United States v. Turkette, 452 U.S. 576, 580, 101 S. Ct. 2524, 2527, 69 L. Ed. 2d 246 (1981), citing Consumer Product Safety Comm'n v. GTE Sylvania, 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766 (1980). Section 1453(1) excludes from the "coastal zone" two categories of land: those "the use of which is by law subject solely to the discretion of ... the Federal Government," (emphasis added), and those "the use of which ... is held in trust by the Federal Government."[5] On its face, the first category does not include the land at issue here. Federal property encumbered by perfected mining claims is by law not subject solely to the government's discretion. The holder of such a claim has an exclusive possessory interest in the land, 30 U.S.C. § 26, Union Oil Co. v. Smith, 249 U.S. 337, 348-49, 39 S. Ct. 308, 310-11, 63 L. Ed. 635 (1919): this "unique form of property," Best v. Humboldt Placer Mining Co., 371 U.S. 334, 335, 83 S. Ct. 379, 382, 9 L. Ed. 2d 350 (1963), is "property in the fullest sense of that term," Wilbur v. Krushnic, 280 U.S. 306, 316-17, 50 S. Ct. 103, 104-05, 74 L. Ed. 445 (1930), and cannot be taken by the United States without payment of compensation, Freese v. United States, 226 Ct. Cl. 252, 639 F.2d 754, 757, cert. denied, 454 U.S. 827, 102 S. Ct. 119, 70 L. Ed. 2d 103 (1981). Plaintiff argues that its interest in its unpatented mining claims on national forest land is subject to governmental discretion pursuant to the Forest Service Regulations. But those regulations do not, and under their enabling statute cannot, impermissibly encroach upon the right to exploit placer claims for mining purposes, see OAA, 16 U.S.C. § 478 ("Nor shall anything herein prohibit any person from entering upon such national forests for all proper and lawful purposes, including that of prospecting, locating, and developing the mineral resources thereof."); United States v. Weiss, 642 F.2d 296, 299 (9th Cir.1981). Similarly faulty is plaintiff's contention that the government wields discretion under the Surface Resources and Multiple Use Act of 1956, 30 U.S.C. §§ 612 et seq. ("SRMUA"),[6] which restricts use of 1368 mining claims to mining and incidental operations and grants the United States and its licensees the right to manage surface resources. See also 43 C.F.R. § 3712.1(b) (1983) (regulation by Bureau of Land Management ("BLM") implementing SRMUA). Although the SRMUA does "open up the public domain to greater, more varied uses," United States v. Curtis-Nevada Mines, Inc., 611 F.2d 1277, 1285 (9th Cir. 1980) (SRMUA grants general public right of free access to land for recreational use of surface resources even where no federal permit required), the statute "was not intended ... to interfere with the historical relationship between the possessor of a mining claim and the United States," id. at 1281. Section 612(b) expressly provides that no use of surface resources by the United States or its licensees may materially interfere with mining or incidental operations, and a mining claimant can sue to enjoin any such interference, Curtis-Nevada, 611 F.2d at 1286. In light of the explicit reservation of rights under the Mining Act in the Forest Service Regulations and the SRMUA, it cannot be found that the United States has sole discretion over the use of lands subject to plaintiff's valid mining claims.[7] Moreover, as holder of a valid mining claim, plaintiff need only comply with certain procedural requirements set forth in the Mining Act and regulations promulgated by the BLM, 43 C.F.R. §§ 3861.1 et seq. (1983), as well as pay a set fee of $5.00 per acre to acquire title to the land and thus withdraw it from regulation by the Forest Service and the SRMUA. Transfer of the property is non-discretionary: the government has no choice but to pass title upon tender of payment and procedural compliance, see South Dakota v. Andrus, 614 F.2d 1190, 1193 n. 3 (8th Cir.), cert. denied, 449 U.S. 822, 101 S. Ct. 80, 66 L. Ed. 2d 24 (1980) ("the actions taken by the Secretary of the Interior in processing an application for patent by such claimant are not discretionary; issuance of a patent can be compelled by court order"). Plaintiff's insistence that patent procurement may be complex, time-consuming and expensive is irrelevant to the question of governmental control: the special property interest created by the Mining Act in valid and patentable claims simply does not fit within § 1453(1)'s exclusion of lands subject to federal discretion. Plaintiff also contends that its claims fall within the second prong of the exclusionary clause because historically the government holds all federal lands in trust for the people, see, e.g., United States v. California, 332 U.S. 19, 40, 67 S. Ct. 1658, 1669, 91 L. Ed. 1889 (1947); Curtis-Nevada, 611 F.2d at 1283; United States v. Ruby Co., 1369 588 F.2d 697, 704-05 (9th Cir.1978), cert. denied, 442 U.S. 917, 99 S. Ct. 2838, 61 L. Ed. 2d 284 (1979). Defendants counter that the clause is a term of art for Indian lands "held in trust" by the United States pursuant to the unique fiduciary relationship between the Indians and the government, see, e.g., United States v. Bowling, 256 U.S. 484, 486-87, 41 S. Ct. 561, 562, 65 L. Ed. 1054 (1921); United States v. Chase, 245 U.S. 89, 99-100, 38 S. Ct. 24, 27, 62 L. Ed. 169 (1917); Santa Rosa Band of Indians v. Kings County, 532 F.2d 655, 666 (9th Cir.1975), cert. denied, 429 U.S. 1038, 97 S. Ct. 731, 50 L. Ed. 2d 748 (1977). The Court notes first that Congress has used the phrase "trust lands" with reference to Indian lands in a number of other federal statutes, see 16 U.S.C. § 583f ("trust or restricted Indian land"); 28 U.S.C. § 2409a (same). More significantly, plaintiff's reading would render the exclusionary clause redundant, and statutes should generally not be construed to render any provision surplusage, Co Petro Marketing Group, Inc. v. Commodity Futures Trading Comm'n, 680 F.2d 566, 569-70 (9th Cir.1982). The category of lands subject to the sole discretion of the United States would be included within "lands held in trust" were that phrase interpreted to mean all federal lands. Surplusage is eliminated if the phrase is read to refer to Indian lands since they are plainly not subject to the government's sole discretion, and the second clause then complements rather than subsumes the first. Plaintiff's mining claims are thus not excluded as lying on land held in trust by the Federal Government. Even if the § 1453(1) exclusion is found to be ambiguous, consideration of the congressional intent behind and administrative interpretation of the provision leads to no contrary conclusion. From among the sparse references in the legislative history, plaintiff cites the statement in Conference Committee Report 92-1544, reprinted in Congressional Research Service, Legislative History of the CZMA of 1972 as Amended at 443, 455 (1976) (hereinafter Legislative History), that [t]he conferees also adopted the Senate language in this section which made it clear that Federal lands are not included within a State's coastal zone. As to the use of such lands which would affect a State's coastal zone, the provisions of section [1456(c)] would apply. It also points to Congressman Mosher's observation that [t]he final version in no way affects the jurisdictional responsibilities of the [EPA], any other federal agency, or the Department of the Interior in regard to the administration of federal lands, since the conferees have specifically eliminated those land areas from the definition of coastal zone, 118 Cong.Rec. 35548 (Oct. 12, 1972). Although the above references might suggest that § 1453(1) was intended to exclude all federal lands, it is clear from these and other statements and from the discernible objective of the exclusion that Congress sought to avert state interference with federal use of federal land and not with private activity subject to only limited government control. Senate Report No. 92-753 U.S.Code Cong. & Admin.News 1972, p. 4776, reprinted in Legislative History, supra, at 193, 200-01, notes that the Act does not "extend[] State authority to land subject solely to the discretion of the Federal Government such as national parks, forests, and wildlife refuges, Indian reservations and defense establishments." Moreover, Congressman Mosher's statement expresses concern that control by federal agencies not be diminished: where private activity even on federal land is not subject to the discretion of some department or agency, the basis for the exclusion disappears. See also Sen.Rep. No. 91-1435, 91st Cong., 2d Sess. 38-39 ("Federal lands are excluded in order that the Federal Government's independence in the management of its lands will not be compromised." [emphasis added]). Generalized references to "federal lands" were based on the assumption, almost always 1370 true, that the government wields sole discretion over the use of federal land: it is reasonable to conclude that public lands beyond the scope of federal control were not what the legislators had in mind. But the Mining Act creates precisely this kind of unanticipated use of federal land, a "unique form of property" to which the government holds nothing but legal title. Congress's concern with protecting "federal jurisdiction" is not advanced by excluding from state coastal regulation private activity that is not within the federal government's discretion to prevent. This reading of the statutory history is buttressed rather than negated by the August 10, 1976, letter of the Assistant Attorney General, Office of Legal Counsel, United States Department of Justice, referred to in the regulations promulgated by the National Oceanic and Atmospheric Administration ("NOAA"), 15 C.F.R. §§ 920.1 et seq. (1984), pursuant to the CZMA and relied on by plaintiff, see id. § 920.2(b). Not only does the letter make clear that "lands held in trust" refers to Indian lands[8] but it expressly defines the "statutory test for exclusion" as "discretion regarding use of the land." Finally, plaintiff gains no additional support from the dictum in Secretary of the Interior v. California, ___ U.S. ___, 104 S. Ct. 656, 662, 78 L. Ed. 2d 496 (1984), that the "exclusion [reaches] federal parks, military installations, Indian reservations, and other federal lands that would lie within the coastal zone but for the fact of federal ownership." That decision concerned the "consistency review" provisions of the Act, and the Supreme Court merely assumed in passing that federally-owned land was subject to the government's sole discretion. As has been noted, that generally valid assumption does not apply to perfected mining claims under the Mining Act, and Secretary of the Interior cannot be read to the contrary. In sum, the CZMA sought to encourage state management of activities within the nation's coastal regions. Although Congress stopped short of subjecting federal use of public lands to direct state regulation, it did require that federally supported or licensed activity affecting the coastal zone be "consistent" with state Management Programs. But it did not mean to shield from direct state regulation purely private activity such as commercial mining operations on federal land which are not subject to ultimate federal control. Had it so wished, Congress could have simply excluded all federally-owned lands from the coastal zone. This it did not do, and if the "sole discretion" language of § 1453(1) is not to be stripped of meaning, plaintiff's mining activity cannot be found to fall within its scope.[9] III. FEDERAL PREEMPTION. Plaintiff argues that even if the coastal zone is held to include the federal lands subject to its mining claims, regulation pursuant to the CCA, a state statute, is preempted by the federal Mining Act and the Forest Service regulations. Defendants respond merely that there is no state-federal conflict because the CZMA "converts the state Coastal Act into a federal standard that has the dignity of federal law in a cooperative federalism program," Def's Brief at 14. 1371 Defendants misconceive the "cooperative" scheme established by the CZMA. The Act encourages state regulation of the coastal zone by granting funds for the implementation of approved state programs and subjecting activities affecting the coastal zone by federal agencies and licensees to "consistency review" under § 1456. It does not otherwise federalize states' Management Programs. There is no doubt that Congress can, if it so chooses, enact federal requirements which incorporate state regulatory standards, see, e.g., Chevron, U.S.A., Inc. v. Hammond, 726 F.2d 483, 489-90 (9th Cir.1984) (Clean Water Act adopts state permit requirements), but nothing in the CZMA or in the NOAA's regulations purports to "convert" state Management Programs into federally mandated standards. Rather, the Statement of Congressional Findings "encourage[s] the states to exercise their full authority over the lands and waters in the coastal zone ...," 16 U.S.C. § 1451(i). In return for developing programs consistent with federal policies and in accordance with the recommendations of federal agencies, states are granted monetary assistance and "consistency review" power over federal agencies' and licensees' activities; they are not cloaked with federal authority to directly regulate private activity by instituting permit requirements in conflict with federal statutes or violative of federally-bestowed rights. Moreover, the CZMA no where provides for preemption of conflicting federal laws even with regard to its "consistency review" provisions. Rather, § 1456(e)(2) provides that the Act shall not be construed as "superseding, modifying or repealing existing laws applicable to the various Federal agencies...." With regard to this provision, Congressman Mosher stated categorically that the Act "does not supersede, modify or repeal existing federal law," 118 Cong.Rec. 26479 (Aug. 2, 1972). Thus, defendants can hardly rely on the CZMA to argue that its state-enacted Management Program necessarily trumps federal rights granted under the Mining Act. That the CZMA does not give preclusive federal effect to the state's Management Program does not compel the conclusion, however, that the Mining Act preempts the CCA's permit requirement. Plaintiff bases its claim of federal preemption essentially on three grounds. First, it argues that, as a general rule, states may not regulate activities conducted wholly on federal property. Second, it contends that even if the State retains legislative jurisdiction over federal forest lands, the Mining Act preempts regulation of its mining operations. Finally, it claims that the approval required by the Forest Service pursuant to its jurisdiction over the national forests under the OAA "occupies the field" of mining regulation and displaces both parallel and conflicting state requirements. A. Federal Enclaves. Pursuant to Article I, § 8, cl. 17 of the Constitution, the federal government can acquire exclusive or partial legislative jurisdiction by consensual acquisition of land or by a state's subsequent cession of authority, Paul v. United States, 371 U.S. 245, 265, 83 S. Ct. 426, 438, 9 L. Ed. 2d 292 (1963). With regard to such federal enclaves, "where `Congress does not affirmatively declare its instrumentalities or property subject to regulation,' `the federal function must be left free' of regulation," Hancock v. Train, 426 U.S. 167, 179, 96 S. Ct. 2006, 2012, 48 L. Ed. 2d 555 (1976). See also EPA v. State Water Resources Control Board, 426 U.S. 200, 211, 96 S. Ct. 2022, 2027, 48 L. Ed. 2d 578 (1976). Plaintiff does not, and cannot, assert, however, that its mining operations on federal land somehow convert it into a federal instrumentality. Nor does plaintiff claim that the national forest on which its mining claims lie is a "federal enclave" comparable to a fort or military reservation and subject solely to federal legislative jurisdiction. See, e.g., United States v. County of Fresno, 429 U.S. 452, 455, 97 S. Ct. 699, 701, 50 L. Ed. 2d 683 (1977) (states retain civil and criminal jurisdiction over national forests); United States v. California, 1372 655 F.2d 914, 919 (9th Cir.1980). There is, therefore, no presumption that state regulation of plaintiff's mining operations is preempted merely because they are conducted on federal land, and the Hancock line of cases cited by plaintiff is inapplicable. B. Mining Act. Plaintiff next argues that although the state may retain legislative jurisdiction over federal lands within its territory, "Congress equally surely retains the power to enact legislation respecting those lands pursuant to the Property Clause" of the Federal Constitution, Article IV, § 3, cl. 2, Kleppe v. New Mexico, 426 U.S. 529, 543, 96 S. Ct. 2285, 2293, 49 L. Ed. 2d 34 (1976) (upholding constitutionality of The Wild Free-roaming Horses and Burros Act, 16 U.S.C. §§ 1331-1340, under the Property Clause). It is pursuant to the Property Clause that Congress enacted the Mining Act which necessarily overrides conflicting state laws under the Supremacy Clause: "a different rule would place the public domain of the United States completely at the mercy of state legislation," Camfield v. United States, 167 U.S. 518, 526, 17 S. Ct. 864, 867, 42 L. Ed. 260 (1897). Preemption of state law by federal statute is not to be presumed, however, absent "persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained," Chicago & N.W. Trans. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S. Ct. 1124, 1130, 67 L. Ed. 2d 258 (1981); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S. Ct. 1210, 1217, 10 L. Ed. 2d 248 (1963). Federal law preempts only those state statutes that "stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Perez v. Campbell, 402 U.S. 637, 649, 91 S. Ct. 1704, 1711, 29 L. Ed. 2d 233 (1971); Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404, 85 L. Ed. 581 (1941). Plaintiff thus argues not that the Mining Act precludes states from any regulation of its mining operations, but that the CCA's permit requirement amounts to a "veto power" over its federally authorized activities and thus an obstacle to congressional objectives. The Court does not agree. Plaintiff relies primarily on the Ninth Circuit's decision in Ventura County v. Gulf Oil Corporation, 601 F.2d 1080 (9th Cir.1979), aff. mem., 445 U.S. 947, 100 S. Ct. 1593, 63 L. Ed. 2d 782 (1980). There the BLM had leased to defendant 120 acres within Los Padres National Forest for oil drilling pursuant to the Mineral Lands Leasing Act of 1920, 30 U.S.C. §§ 181 et seq. Plaintiff County sued to enjoin defendant from drilling an oil well pursuant to its lease and approval by various federal agencies unless it secured an Open Zone Use permit from the County Planning Commission pursuant to local ordinance. The Court affirmed dismissal of the action on the ground that [t]he federal Government has authorized a specific use of federal lands, and [the County] cannot prohibit that use, either temporarily or permanently, in an attempt to substitute its judgment for that of Congress. 601 F.2d at 1084. The County's argument that no conflict between federal and state law had yet arisen since it had not yet denied a permit was rejected as inconsistent with its request for an injunction: [t]he issue is whether [the County] has the power of ultimate control over the Government's lessee, and this issue persists whether or not a use permit would eventually be granted. 601 F.2d at 1085. Thus the Court invalidated what it characterized as "a local veto power," id. at 1086. See also Brubaker v. Board of County Comm'rs, 652 P.2d 1050 (Col.1982) (Mining Act preempts County's requirement of special use permit for test drilling which had been denied). Defendants argue that Ventura is distinguishable because the County there had sought to prohibit or veto rather than merely to regulate federally authorized activity. Plaintiff's reading of Ventura to 1373 equate any permit requirement at all to a "veto power" is cast into doubt, defendants contend, by subsequent Supreme Court decisions rejecting facial challenges to state regulatory schemes absent concrete allegations that the regulations will necessarily be unconstitutionally applied, see, e.g., Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264, 295, 101 S. Ct. 2352, 2370, 69 L. Ed. 2d 1 (1981); Agins v. City of Tiburon, 447 U.S. 255, 260, 100 S. Ct. 2138, 2141, 65 L. Ed. 2d 106 (1980). Defendants' contention is buttressed by the Ninth Circuit's more recent holding in United States v. Weiss, supra, that regulations promulgated by the Forest Service concerning unpatented mining claims did not impermissibly encroach on rights granted by the Mining Act. Citing Agins, the Court emphasized that "the reasonableness of the regulations has not been put in issue. Although authority exists for the promulgation of regulations, those regulations may, nevertheless, be struck down when they do operate to accomplish the statutory purpose or where they encroach upon other statutory rights. Appellants have not attempted to comply with the regulations; therefore, those issues are not before us on appeal," 642 F.2d at 299 n. 5 (emphasis added). The Court agrees that, in light of Weiss, Ventura does not compel a finding that defendants' permit requirement necessarily clashes with rights granted under the Mining Act. The CCC seeks not to prohibit or "veto," but to regulate plaintiff's mining activity in accordance with the detailed requirements of the CCA. Unlike in Ventura where zoning permits could be "issued on whatever conditions Ventura determines appropriate, or ... may never [be] issued at all," 601 F.2d 1084, here the CCA provides for permit issuance upon compliance with regulatory requirements comparable to those of the Forest Service and approved in Weiss. There is no reason to find that the CCC will apply the CCA's regulations so as to deprive plaintiff of its rights under the Mining Act; if and when that comes to pass, plaintiffs can then seek to enjoin their enforcement. In sum, the right of states to regulate mining operations on federal land has long been recognized, see Butte City Water Co. v. Baker, 196 U.S. 119, 123-25, 25 S. Ct. 211, 211-13, 49 L. Ed. 409 (1905) (upholding Montana law prescribing mining claim location requirements). As long as the state's permit requirement does not render plaintiff's exercise of rights under the Mining Act impossible, no impermissible conflict exists and plaintiff's facial challenge to the CCA's provisions must fail. See State ex rel. Andrus v. Click, 97 Idaho 791, 554 P.2d 969, 974 (1976); Brubaker, 652 P.2d at 1059 ("[s]tate and local laws that merely impose reasonable conditions upon the use of federal lands may be enforceable, particularly where they are directed to environmental protection concerns"). C. Forest Service Regulations. Finally, plaintiff claims that the regulations issued by the Forest Service which require federal approval of mining Plans of Operations preempt the CCA's permit regulation. Federal regulations such as those of the Forest Service may preempt parallel state regulation in two ways. First they may be found to "occupy the field" of regulation of a particular activity in light of such factors as congressional intent, comprehensiveness of the federal regulations, and need for uniform regulation, see Chevron, 726 F.2d at 486. Second, a conflict may be found where "compliance with both federal and state regulations is a physical impossibility," Florida Lime & Avocado Growers, 373 U.S. at 142-43, 83 S. Ct. at 1217, or where the state regulation presents an obstacle to achievement of the purpose of the federal regulation, Ray v. Atlantic Richfield Co., 435 U.S. 151, 158, 98 S. Ct. 988, 994, 55 L. Ed. 2d 179 (1970). Undertaking this two-tier inquiry recently embraced by the Supreme Court, see Silkwood v. Kerr-McGee Corp., ___ U.S. ___, 104 S. Ct. 615, 621, 78 L. Ed. 2d 443 (1984), and employed by the Ninth Circuit, see Chevron, 726 F.2d at 486 1374 & n. 4, the Court concludes that the Forest Service regulations do not preempt the CCA's permit requirement. 1. Occupying the Field. The Forest Service regulations, as has been noted, were enacted pursuant to the OAA which seeks to preserve the nation's forests from "destruction ... and depredation," 16 U.S.C. § 551. Not only does nothing in the statutory language evince an intent to occupy the field of mining regulation on federal forest land but § 480 specifically provides The jurisdiction, both civil and criminal, over persons within national forests shall not be affected or changed by reason of their existence.... Moreover, the regulations promulgated by the Forest Service explicitly require compliance with applicable state standards for air quality, water quality, solid waste disposal and other environmental concerns. Plaintiff points to no legislative history indicating that either Congress or the Forest Service intended to occupy the field of mining regulation on national forest land. Nor can the Court imagine any reason for insisting on uniform regulation of the environmental impact of mining operations on forest land in different states, especially in light of the Forest Service's explicit incorporation of state standards in its regulations. The Court thus concludes that to invalidate the CCA's permit requirement as applied to plaintiff's mining operation would frustrate the clear intent of Congress and the Service that there be "collaborative federal/state efforts" to protect public forests. 2. Conflict. The inquiry thus becomes whether there is an irreconcilable conflict, Kerr, 104 S.Ct. at 626, between the Forest Service Regulations and the CCA's permit requirement, keeping in mind the "sensitive interrelationship between statutes adopted by the separate, yet coordinate, federal and state sovereignties", Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. 117, 127, 94 S. Ct. 383, 389, 38 L. Ed. 2d 348 (1973). Plaintiff points to and the Court finds no such irreconcilable conflict. To begin with, the legislative objectives of the federal and state regulations do not clash but are instead analogous, Kewanee Oil v. Bicron Corp., 416 U.S. 470, 94 S. Ct. 1879, 40 L. Ed. 2d 315 (1974). The purpose of both is to "minimize adverse environmental impacts" on National Forest System surface resources, 36 C.F.R. § 228.1 (1983), and in the coastal zone, Cal.Pub. Res.Code §§ 30001-30004. Moreover, until 1974 the Forest Service had no permit requirement; thus, as in Chevron, 726 F.2d at 497, the history of federal regulation "demonstrates increasingly stringent protection" of forest land subject to mining claims. Furthermore, plaintiff cannot claim that the CCA permit in any way prevents it from compliance with the federal regulations. Instead, the CCA is more restrictive than the Forest Service regulations. But, absent explicit preemptive intent, Chevron, 726 F.2d at 498 n. 19, "the possibility of proscription by California of conduct that federal law might permit is not sufficient to warrant preemption," William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d 1014, 1049 (9th Cir.1981), cert. denied, 459 U.S. 825, 103 S. Ct. 57, 74 L. Ed. 2d 61 (1982). Finally, the Court notes that the Forest Service's Environmental Assessment of plaintiff's Plan of Operations expressly stated that Granite Rock is responsible for obtaining any necessary permits which may be required by the California Coastal Commission. Although the Forest Service is plainly not empowered to grant the State permit authority otherwise preempted by federal law, here it is the Forest Service itself which is alleged to have preempted the CCA. Its own requirement of compliance with the CCA's permit requirement is clear evidence that the federal regulations relied on here were not intended to preempt, and do not conflict with, the CCA. 1375 IV. CONCLUSION. Because the Court concludes that the CCA requires plaintiff to secure a permit from the CCC for its mining operations and that the permit requirement is not federally preempted, it need not address defendants' arguments based on California's inherent police power. Moreover, defendants' contention that plaintiff's future Plans of Operations are subject to consistency review pursuant to § 1456(c)(3)(A) is clearly not adjudicable at this time. Plaintiff concedes that it intends to file additional Plans with the Forest Service, that it intends to continue mining as long as it is economically viable under federal laws, and that its current reserves of limestone indicate future operations in excess of fifty years on a quarry of up to 20 acres. Plaintiff has submitted no further Plans, however, nor has it been granted any additional approvals by the Forest Service. Its contention now that it will not seek consistency review if and when it does submit additional Plans does not suffice to create a case or controversy cognizable in this Court. In any case, plaintiff now seeks only a declaratory judgment as to the CCA's permit requirement inasmuch as defendants admit to having waived consistency review of the present Plan. Consistency review is thus no longer at issue. Accordingly, plaintiff's motion for summary judgment is denied. The Court having determined that plaintiff is not entitled to relief, judgment dismissing the action will be entered. IT IS SO ORDERED. NOTES [1] The CCC itself was originally named as a defendant but was dismissed by this Court based on its immunity from suit under the Eleventh Amendment. See Alabama v. Pugh, 438 U.S. 781, 98 S. Ct. 3057, 57 L. Ed. 2d 1114 (1978). [2] The provision when originally enacted in 1976 read: provided, however, that pursuant to the Federal [CZMA], excluded from the coastal zone are lands the use of which is by law subject solely to the discretion of or which is held in trust by the federal government, its officers or agents. It was amended in 1978. [3] California estimates the value of this quarry at about $15,000. [4] No Plan of Operations was required for the "remov[al of] small samples or specimens" in which plaintiff was engaged from 1959 to 1980, 36 C.F.R. § 228.4(1)(ii)-(iii) (1983). [5] The Court notes that the parties misread the provision to exclude "lands ... which is held in trust by the Federal Government...." (emphasis added). That reading is not grammatical. The correct and more reasonable reading is "lands the use of which is ... held in trust by the Federal Government...." (emphasis added). [6] Section 612 reads in pertinent part: (a) Any mining claim hereafter located under the mining laws of the United States shall not be used, prior to issuance of patent therefor, for any purposes other than prospecting, mining or processing operations and uses reasonably incident thereto. (b) Rights under any mining claim hereafter located under the mining laws of the United States shall be subject, prior to issuance of patent therefor, to the right of the United States to manage and dispose of the vegetative surface resources thereof (except mineral deposits subject to location under the mining laws of the United States). Any such mining claim shall also be subject, prior to issuance of patent therefor, to the right of the United States, its permittees, and licensees, to use so much of the surface thereof as may be necessary for such purposes or for access to adjacent land: Provided, however, That any use of the surface of any such mining claim by the United States, its permittees or licensees, shall be such as not to endanger or materially interfere with prospecting, mining or processing operations or uses reasonably incident thereto.... [7] Plaintiff also points to the Multiple Mineral Development Act of 1954, 30 U.S.C. §§ 521 et seq., the Mining Claims Occupancy Act of 1954, id. §§ 701 et seq., and the Mine Health and Safety Act, id. §§ 801 et seq. The first Act, however, merely provides for coordination of operations under federal mineral leases and unpatented mining claims and requires each to be conducted so as not to materially interfere with the other, id. § 526(b)-(c). The second Act authorizes the sale of federal land to qualified holders of unpatented mining claims found to be invalid. The third Act establishes mandatory health and safety standards for miners. None of these statutes bestows on the United States sole discretion over the use of federal land subject to valid mining claims. [8] The letter states at page 4: "4. Trust lands. Indian lands owned by the United States have been held to be owned in trust for Indian tribes or for individual Indians" (citations omitted). [9] The argument that activities subject to consistency review under the CZMA and to direct regulation under a state's Management Program are mutually exclusive and that the Plan of Operations cannot be subject to both is without merit. First, the Court does not here reach the issue of whether plaintiff must submit its Plan of Operations to consistency review under § 1456(c)(3)(A). Second, nothing in the statutory language supports plaintiff's reading. Activity by a federal licensee in a state coastal zone, for example, would clearly be subject to both kinds of regulation. The consistency review provision is somewhat broader than direct state regulation because it applies to activities affecting the coastal zone and somewhat narrower because it applies only to federally supported or licensed activities. But there is no basis for finding that an activity subject to consistency review is for that reason alone shielded from direct state regulation.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2310225/	572 F. Supp. 667 (1983) Russell C. TAYLOR, Plaintiff, v. BEAR STEARNS & COMPANY, et al., Defendants. Civ. A. No. C82-2059A. United States District Court, N.D. Georgia, Atlanta Division. September 30, 1983. 668 669 J. Boyd Page, Cofer, Beauchamp, Hawes & Brown, Atlanta, Ga., for plaintiff. Robert Thornton, King & Spalding, Gary W. Hatch, Hansell Post, Brandon & Dorsey, Richard Kirby, Atlanta, Ga., for defendants. ORDER FORRESTER, District Judge. This action, brought under the Securities Exchange Act of 1934 (SEA), the Commodity Exchange Act (CEA), the Racketeer Influenced and Corrupt Organizations Act (RICO), and which has several state theories, is before the court on defendants' motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6). This court has jurisdiction over this action pursuant to Section 27 of the SEA, 15 U.S.C. § 78aa; Sections 1331 and 1332 of the Judicial Code, 28 U.S.C. §§ 1331, 1332; and pursuant to the doctrines of pendent and ancillary jurisdiction. Plaintiff alleges that while defendant Bowman was employed by Paine, Webber, Jackson & Curtis, Inc. (Paine Webber), plaintiff opened several accounts for which Mr. Ishmael Bowman (Bowman) acted as broker. Plaintiff alleges that these accounts were opened approximately from July 12, 1978, to August 10, 1979. Plaintiff alleges that in approximately August of 1979, defendant Bowman changed employers and began working for Bear Stearns & Co. (Bear Stearns). On or about August 10, 1979, plaintiff alleges that he opened his account with Bear Stearns, with defendant Bowman acting as broker. Plaintiff allegedly closed his Paine Webber account on or about August 10, 1979, and thereafter had no further dealings with Paine Webber. Plaintiff closed his accounts at Bear Stearns on or about October 15, 1980, and thereafter had no further dealings with Bear Stearns. In general terms, plaintiff alleges that he lost money in his accounts both at Paine Webber and Bear Stearns as a result of a series of unauthorized trades undertaken by the defendants for the purpose of generating commissions. 670 In their motions to dismiss, defendants seek to dismiss plaintiff's claims under Section 10(b) of the SEA, Section 10 of the Fair Business Practices Act of 1975, Sections 4b and 4c of the CEA, and RICO. In addition, defendant Giarletta moves pursuant to Fed.R.Civ.P. 12(b)(2) to dismiss all counts and claims as against him individually on the ground that he is not subject to the personal jurisdiction of this court. For the reasons set forth below, defendants' motions shall be GRANTED IN PART and DENIED IN PART. I. A. The central task in determining whether Counts I and II are to be dismissed is to find a "security" that was the object of the activities in question. Woodward v. Metro Bank, 522 F.2d 84, 91 (5th Cir.1975). Section 10(b) of the Securities Exchange Act of 1934, which provides the basis for Counts I and II, provides, in pertinent part, as follows: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). Rule 10b-5 of the Securities and Exchange Commission provides, in pertinent part, as follows: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, ... (1) to employ any device, scheme, or artifice to defraud, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading, or (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. In the case at bar, plaintiff maintained discretionary securities and commodities futures investment accounts with defendants Paine Webber and Bear Stearns. In addition, plaintiff invested in a commodities futures trading program directed by defendant Bowman while he was employed at both Paine Webber and Bear Stearns. Amended Complaint, ¶¶ 19, 20. In his brief, plaintiff asserts that the transactions at issue involved Treasury Bills, Treasury Bonds, GNMAs, and commercial paper, and contends therefore that this action involves "securities" within the meaning of Section 3(a)(10), 15 U.S.C. § 78c(a)(10). Defendants contend, on the other hand, that plaintiff's claims under Section 10(b) and Rule 10b-5 must be dismissed because the commodities futures accounts upon which plaintiff bases his claims do not constitute securities and that accordingly the securities claims are inapplicable to this action.[1] The issue presented on this motion to dismiss for failure to state a claim under the federal securities law is whether the allegations in the complaint permit a finding that a defendant sold to this plaintiff "securities" within the meaning of the Securities Exchange Acts of 1934. For the plaintiff to prevail on federal securities claims, it must be determined that what were fraudulently sold to plaintiff by defendants were "securities." Plaintiff avers 671 that he communicated with Paine Webber, Hudson, and Bowman regarding an interest rate futures trading program, Amended Complaint, ¶ 25, which entailed an "unusual type of trading called spread trading," id., ¶ 27, and that as a result of the communications, he entered into a contract with Paine Webber and opened a discretionary securities and commodities account. Id., ¶ 29. While it is not clear whether plaintiff is alleging fraud in the sale of any particular investment instrument, it is clear that plaintiff is alleging fraud in the sale of a program by his opening of a discretionary account. Id., ¶ 33. See also ¶ 43A. Similarly, as to defendant Bear Stearns, it appears that the alleged fraud occurred in the sale of "the overall accounts and trading program." Id., ¶ 56. See also, id., ¶ 60. The term "security" includes "any ... investment contract." 15 U.S.C. §§ 77b(1); 78c(a)(10). In determining whether a particular financial relationship constitutes an investment contract, this court must evaluate whether (1) the scheme involves an investment of money (2) in a common enterprise (3) with profits to come solely from the efforts of others. SEC v. W.J. Howey Co., 328 U.S. 293, 301, 66 S. Ct. 1100, 1104, 90 L. Ed. 1244 (1946). See Moody v. Bache & Co., Inc., 570 F.2d 523, 526 (5th Cir.1978) (discretionary accounts in commodities futures contracts may be investment contracts for purposes of the Securities Act). A review of the complaint read in light of the Howey test reveals that plaintiff "invested" in accounts at Paine Webber and Bear Stearns. Plaintiff avers that he parted with money in the hope of receiving profits through the efforts of another individual with expertise in the management of his money. The complaint can be read to allege that plaintiff's placement of money into the discretionary securities and commodities futures investment accounts and in a commodities futures trading program subjected him to a risk over which he had no control. The complaint can further be read to allege that since plaintiff was not knowledgeable about investments, plaintiff had expectations that defendants would make all decisions prudently as to the management of the accounts. As to the second consideration of the Howey test, the averments suggest a "common enterprise." A common enterprise is said to exist where "the fortunes of the investor [were] interwoven with and dependent upon the efforts and success of those seeking the investment ...." SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476, 482 n. 7 (9th Cir.), cert. denied, 414 U.S. 821, 94 S. Ct. 117, 38 L. Ed. 2d 53 (1973). Defendants at all relevant times were engaged in the securities and commodities futures contracts brokerage and financial services business and rendered services to clients including the investigation of investment alternatives and opportunities, the managing of securities and commodities futures contract accounts for clients, and the directing of securities and commodities futures contract transactions and trading programs for clients. See Amended Complaint, ¶ 14. As such, an investor could inexorably rely upon their guidance for the success of his or her investment. Here, allegations of defendants' dominance of the financial relationship exists. Such a dominance provides commonality. See SEC v. Continental Commodities Corp., 497 F.2d at 522-23 (5th Cir.1974). Given plaintiff's expectation that defendants were his investment managers, there exists a one-to-one relationship or a "vertical commonality." Surino v. E.F. Hutton & Co., Inc., 507 F. Supp. 1225, 1237 (S.D.N.Y.1981); Alvord v. Shearson Hayden Stone, Inc., 485 F. Supp. 848, 853 (D.Conn.1980). As to the final consideration of the Howey test, the averments suggest that plaintiff invested in an enterprise according to which the hoped-for profits were to come solely from the efforts of others. Plaintiff avers that all investment decisions were to be made by defendants; as such, any profits were to be caused by defendants' efforts. Therefore, under the Howey test, plaintiff may have purchased "securities" when he opened his discretionary accounts to be managed by defendants. Thus, defendants' 672 argument that Rule 10b-5 has no application in this action because the instruments upon which plaintiff bases his claims were commodities futures contracts over which the SEC has no regulatory jurisdiction is without merit. B. Defendants further argue that plaintiff's claims pursuant to Section 10(b) and Rule 10b-5 are barred by the applicable statute of limitations. This argument must be rejected on the ground that it is premature to evaluate this issue at this Rule 12 posture. Plaintiff alleges that his accounts with Paine Webber were opened on July 12, 1978, and closed on August 10, 1979. Amended Complaint, ¶ 19. Plaintiff also alleges that his account with Bear Stearns was opened on August 1, 1979, and closed on October 15, 1980. Plaintiff's original complaint in this action was filed on September 17, 1982. In Diamond v. Lamotte, 709 F.2d 1419 (11th Cir.1983), the Eleventh Circuit recently affirmed this court and held that the two-year statute of limitations prescribed by the Georgia blue sky statute governs an action brought pursuant to Section 10(b) and Rule 10b-5 in a federal court sitting in Georgia. Yet, the question as to when plaintiff was put on notice as to the facts constituting its alleged cause of action cannot be properly determined at a motion to dismiss stage. As the court in Azalle Meats, Inc. v. Muscat, 386 F.2d 5, 9 (5th Cir.1967), stated, in reversing the district court for determining at a Rule 56 stage the point at which the plaintiff was put on notice: The concept of due diligence is not imprisoned within the frame of a rigid standard; it is protean in application. A fraud which is flagrant and widely publicized may require the defrauded party to make immediate inquiry. On the other hand, one artfully concealed or convincingly practiced upon its victim may justify much greater inactivity. The presence of a fiduciary relationship or evidence of fraudulent concealment bears heavily on the issue of due diligence. (Footnote omitted). This principle was recently reaffirmed in Kennedy v. Tallant, 710 F.2d 711, 716 (11th Cir.1983). The complaint alleges both the presence of a fiduciary relationship and fraudulent concealment. Accordingly, defendants' motion to dismiss Counts I and II for failing to state a claim under Section 10(b) and Rule 10b-5 on the grounds that the claims are barred by the applicable statute of limitations or inapplicable on these facts is DENIED. II. In Count V, plaintiff alleges a violation of the Georgia Fair Business Practices Act (FBPA), O.C.G.A. §§ 10-1-393; 10-1-399. Specifically, plaintiff alleges that defendants participated in, approved, consented to, aided and abetted, and conspired together and with others in: (a) employing unfair or deceptive trade practices, business practices, and business acts in connection with soliciting, managing and directing plaintiff's securities, commodities futures and investment accounts and trading programs, (b) representing that services had sponsorship, approval, characteristics, ingredients, uses, benefits that they did not have, (c) representing that defendant Bowman had approval, status, affiliation or connections that he did not have, and (d) representing that securities brokerage and commodities futures trading services were of a competent and superior standard, quality or grade. Amended Complaint, ¶ 95. The Act provides that "[u]nfair or deceptive acts or practices in the conduct of consumer transactions and consumer acts or practices in trade or commerce are declared unlawful." O.C.G.A. § 10-1-393(a). It allows a private action for any person who suffers injury or damages as a result of consumer acts or practices in violation of the Act to seek equitable injunctive relief and to recover general and exemplary damages. Id., § 10-1-399(a). Given that the statute provides for a private right of action, a consumer who is damaged by unfair or deceptive practices in the conduct of any trade has an independent right to recover under 673 the Act regardless of any other theory of recovery. Zeeman v. Black, 156 Ga.App. 82, 273 S.E.2d 910 (1980); Attaway v. Tom's Auto Sales, 144 Ga.App. 813, 815, 242 S.E.2d 740 (1978). In addition, the providing for a private right of action is but "part of the enforcement and regulatory scheme underlying the public protection policy of the FBPA and does not create an additional remedy for redress of private wrongs occurring outside the context of the public consumer marketplace." Zeeman, 156 Ga.App. at 83, 273 S.E.2d 910. Also that [O.C.G.A. § 10-1-399] provides for equitable injunctive relief and for recovery of treble damages for intentional violations is further evidence that the legislature intended that section to serve as an aid in enforcing the underlying public protection policy of the statute by enlisting the litigative assistance of those individual members of the consuming public damaged by unfair or deceptive acts or practices and not as the basis for a new private remedy for individuals who are damaged by acts or practices which have no potential for impact on the general consuming public. In this remedial aspect the private remedy afforded by the FBPA is analogous to the federal anti-trust law, 15 U.S.C. § 15, which authorizes similar suits by individuals designed to further the broad public interest transcending the private objectives of the parties. Id., at 84, 273 S.E.2d 910. Defendants, in support of their argument that plaintiff's claims in Count V under the FBPA must be dismissed, provide three grounds: (i) Plaintiff's claims pursuant to the FBPA are preempted by the Commodity Exchange Act; (ii) by its own terms, the Act does not apply to the claims alleged in this action; and (iii) plaintiff's claims under the FBPA are barred by the statute of limitations. While the court concludes that the first ground is without merit at this Rule 12 stage, the court agrees with defendants that the Act, by its own terms, does not apply to the claims alleged in this action, and therefore grants defendants' motion to dismiss the FBPA claims. A. The doctrine of preemption is derived from the supremacy clause of Article VI of the United States Constitution. The legislation which the defendants claim as the basis for preemption of the FBPA, a state statute, is the Commodity Exchange Act. Under the CEA, Congress exercised its power under the commerce clause to regulate commodity trading. In 1974, Congress amended the CEA and created the Commodities Futures Trading Commission (CFTC). Pursuant to Section 14 of the 1974 Amendments, the Commission is authorized to grant reparations to any person complaining of any violation of the CEA. 7 U.S.C. § 18. Section 2(a) of the 1974 Amendments provides that: "The Commission shall have exclusive jurisdiction with respect to accounts, agreements ... and transactions involving contracts of sale of a commodity for future delivery ...." 7 U.S.C. § 2. The Amendments also, however, contain a savings clause: "Nothing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or any State." Id. Thus, as to the language of the statute, tension appears to exist between the grant of "exclusive jurisdiction" to the CFTC and the savings clause stating that state and federal court jurisdiction is not limited or superseded. It appears, however, that the primary concern of Congress was preemption of federal and state regulatory schemes. See generally Johnson, The Commodity Futures Trading Commission Act: Preemption as Public Policy, 29 Vand.L.Rev. 1, 32-36 (1976). The purpose of the exclusive jurisdiction provision in the bill passed by the House was to separate the functions of the Commission from those of the Securities Exchange Commission and other regulatory agencies. But the provision raised concerns that the jurisdiction of state and federal courts might be affected. Referring to the treble damages action provided in another bill that he and Senator McGovern had introduced, Senator Clark pointed out that "the House bill not only does not authorize them, but section 201 of that bill may prohibit all court actions. 674 The staff of the House Agriculture Committee has said that this was done inadvertently and they hope it can be corrected in the Senate." It was. The Senate added a savings clause to the exclusive jurisdiction provision, providing that "nothing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or of any State." The Conference accepted the Senate amendment. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 102 S. Ct. 1825, 1843, 72 L. Ed. 2d 182 (1982) (footnotes omitted) (the Supreme Court held that a private right of action can be maintained for damages caused by a violation of the CEA). Given this backdrop, federal courts have held that the CEA preempts private actions based on state statutes that entail administrative agency involvement which might conflict with the CFTC's regulatory role. E.g., W & W Farms, Inc. v. Chartered Systems Corporation, 542 F. Supp. 56, 59-60 (N.D.Ind.1982); Witzel v. Chartered Systems Corporation, 490 F. Supp. 343 (D.Minn. 1980) (claim under Minnesota Securities Act is preempted as that state's securities scheme contemplates state agency involvement and regulation). In other words, if there is a nexus between a private action and a state regulation which conceivably could conflict with the role of the Commission, preemption would be proper. See Bache Halsey, Stuart, Inc. v. Hunsucker, 38 N.C.App. 414, 248 S.E.2d 567 (1978) (where the utilization of a private action under the North Carolina Unfair Trade Practices statute could encompass a cause of action in the Attorney General, whereby the Attorney General could seek a court order to restore money or property, or cancel any contracts obtained in violation of the statute). Here, however, plaintiff does not rely on any section of the Georgia Fair Business Practices Act which would be inconsistent with the operation of the CEA regulatory procedures. See generally Rothschild, A Guide to Georgia's Fair Business Practices Act of 1975, 10 Ga.L.Rev. 917, 922-29 (1976). Cf. Strax v. Commodity Exchange, Inc., 524 F. Supp. 936, 941-42 (S.D.N.Y.1981) (operation of the New York State antitrust law would not interfere with the implementation of the CEA). Therefore, at this Rule 12 stage, plaintiff's claims under the FBPA could not be dismissed on this ground, inasmuch as the allegations of the complaint with respect to the FBPA do not entail an inconsistency with the regulatory scheme of the CFTCA. Cf. Strobl v. New York Mercantile Exchange, 561 F. Supp. 379, 385 (S.D. N.Y.1983) (if, upon development of the facts, a claim would conflict with the regulatory scheme of the Commission, recovery would be barred). B. Unfair or deceptive consumer acts or practices violate the FBPA, unless such activity falls within one of two exemptions created by section 6. The first exemption excludes from the Act's coverage conduct which is "specifically authorized" by state or federal laws. O.C.G.A. § 10-1-396(a). The second exemption protects the news media from the consequences of violations found in advertisements which are printed for others. Id. § 10-1-396(b). Under the first exemption, two interpretations are possible. The first interpretation would exempt from the Act conduct that was specifically authorized. The second interpretation would exempt conduct that is being regulated by an administrative agency. While in the abstract it is possible to envision a regulatory agency's permitting of "activities which do not conflict with the interests which that agency is charged to protect, with no pretense of concern whether those activities might harm other interests," Rothschild, supra, 10 Ga.L.Rev. at 921, practically speaking, the court perceives that an interpretation of section 6 that would exempt conduct authorized specifically by an agency as anomalous, for what administrative agency would authorize an unfair trade practice? In light of the purpose of the FBPA as well as a judicial construction of section 6, the court reads the second interpretation as proper. It is apparent that the scope of the Act is directed toward consumer injuries rather than private wrongs. Zeeman, 156 Ga.App. 675 at 83, 84, 273 S.E.2d 910. Inasmuch as the Act makes specific reference to the Federal Trade Commission Act, 15 U.S.C. § 45, the FBPA is to be invoked only in those instances where the unfair or deceptive practice would have a potential effect on the general consumer public. See O.C.G.A. § 10-1-391; FTC v. Cinderella Career & Finishing Schools, Inc., 404 F.2d 1308, 1313 (D.C.Cir.1968). With the aim of the Act to protect the consumer, it appears that the concern of the Georgia Legislature in enacting the FBPA was to supplement and emendate the remedies in existence prior to 1975. See generally Comment, Consumer Protection in Georgia: The Fair Business Practices Act of 1975, 25 Emory L.J. 445-54 (1976). Yet, to the extent that a remedy is available to an injured consumer in a regulated industry, a Georgia appellate court has held that the FBPA has no application. In Ferguson v. United Insurance Co., 163 Ga.App. 282, 293 S.E.2d 736 (1982), a named beneficiary of an insurance policy was apparently seeking the proceeds due her on the life of her deceased husband. In affirming a trial court's dismissal of a count alleging violations of the FBPA, the court held that "insurance transactions are among those types of transactions which are exempt from the Fair Business Practices Act." Id. at 283, 293 S.E.2d 736. The court explicitly noted that "[i]nsurance transactions in Georgia are specifically authorized and regulated by Title 56, the Georgia Insurance Code," and that "the Insurance Code regulates unfair trade practices within the insurance industry." Id. (emphasis added). Thus, given Ferguson, the phrase "specifically authorized" in section 6 is construed to mean specifically regulated. Therefore, in a situation where a consumer remedy exists, with no need to fill in a legal gap or create a consumer right, and where the industry which is the subject matter of the situation explicitly defines wrongful conduct or unfair and deceptive practices, the FBPA has no application. In the case at bar, the SEA and CEA have implied rights of action for injured persons. Both Acts provide a regulatory apparatus to prevent unfair practices that affect consumers. Therefore, adequate remedies for this plaintiff exist, and there is no need to fill in any gap created by the inadequacies of these remedies. Accordingly, inasmuch as the alleged wrongful transactions which provide the basis for this lawsuit entail conduct that is "specifically authorized and regulated," Ferguson, 163 Ga.App. at 283, 293 S.E.2d 736, by the Securities and Commodity Exchange Acts, plaintiff's claims under Count V must be dismissed. III. In Count VI, plaintiff alleges a violation of Section 4b of the CEA, 7 U.S.C. § 6b. In Count VII, plaintiff alleges a violation of Section 4c of the CEA, 7 U.S.C. § 6c. Defendants argue that these counts must be dismissed, inasmuch as they are subject to a two-year statute of limitations, and therefore the claims are time barred. Defendants argue that since there are similarities between federal securities fraud and commodities fraud, the same applicable limitations period should apply. Assuming arguendo this were true, it would be two years. Diamond v. Lamotte, 709 F.2d 1419 (11th Cir.1983). The appropriate analysis, however, would be to apply the limitations period governing the most closely analogous state cause of action after an examination of the federal cause of action and federal policies involved. Id., at 1421 (citing United Parcel Service v. Mitchell, 451 U.S. 56, 60-61, 101 S. Ct. 1559, 1562-63, 67 L. Ed. 2d 732 (1981); Occidental Life Insurance Co. v. EEOC, 432 U.S. 355, 97 S. Ct. 2447, 53 L. Ed. 2d 402 (1977)). Thus, a two-stage analysis would take place. First, the analysis would begin with an inquiry into the nature and character of the federal claims. Diamond, 709 F.2d at 1421; see Mitchell, 451 U.S. at 60-61, 101 S. Ct. at 1562-63; International Union of Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 705-07, 86 S. Ct. 1107, 1113-1114, 16 L. Ed. 2d 192 (1966). Second, the analysis would then focus upon whether the state limitations 676 period is inconsistent with the policies expressed in the federal statutes. Diamond, 709 F.2d at 1421. In any event, the court need not at this time decide the statute of limitations governing timeliness of actions brought for these violations of the CEA. As stated earlier, irrespective of the statute of limitations period utilized, the statute of limitations does not begin to run until the fraud could reasonably have been discovered. See Azalea Meats, Inc. v. Muscat, 386 F.2d 5 (5th Cir.1967). Therefore, this issue cannot be resolved on a motion to dismiss. IV. In Count VII, plaintiff alleges a violation of Section 4c of the CEA, 7 U.S.C. § 6c. Specifically, plaintiff alleges the following: Defendants, in connection with the sale of commodities futures contracts in contravention of Section 4c of the Commodity Exchange Act, by use of the means and instrumentalities of interstate commerce and the exchanges, participated in, aided and abetted and conspired among themselves (a) to unlawfully enter into or report transactions, commodity [sic] known to the trade as a "wash sale," "cross trade," or "accommodation trade," or a fictitious sale, and (b) to enter into and to report falsely transactions at prices which were not true and bona fide prices. Amended Complaint, ¶ 106. Section 4c comprehends "wash sales" and false report provisions, and makes unlawful such actions by any person in any commodity which may be used for hedging, pricing, or delivery. 7 U.S.C. § 6c(a). These provisions are intended to prevent transactions that are reported as though they were at arm's length and represented genuine supply-demand, but are in fact collusive and artificial; such transactions mislead market watchers as to the true volume of trading and may be part of a price-altering manipulation. 1 A. Braumburg & L. Lowenfels, Securities Fraud & Commodities Fraud § 4.6, at 82.301-02 (1982) (hereinafter cited as Securities Fraud & Commodities Fraud). Defendant argues that there is no implied right of action under Section 4c of the CEA. The court agrees. In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 102 S. Ct. 1825, 72 L. Ed. 2d 182 (1982), a five-member majority held that implied actions are available to plaintiffs alleging violations of the CEA. Although "[t]he central question presented by these cases is whether a private party may maintain an action for damages caused by a violation of the CEA," id. 102 S.Ct., at 1827, a close reading of the facts indicates that specific violations of the Act were at issue only. See, id., at 1834 n. 42; id. at 1836 n. 49. Justice Stevens, writing for the majority, found that the controlling question was not whether Congress intended to create a new cause of action when it passed the Commodity Futures Trading Commission Act of 1974, but instead whether Congress intended to eliminate remedies already available under the CEA. See, id., at 1839. As the Court stated: "The relevant inquiry is not whether Congress correctly perceived the then state of the law, but rather what its perception of the state of the law was." Id. n. 61 (quoting Brown v. GSA, 425 U.S. 820, 828, 96 S. Ct. 1961, 1965, 48 L. Ed. 2d 402 (1976)). Posing the question in this fashion made Congress' silence dispositive: "The fact that a comprehensive reexamination and significant amendment of the CEA left intact the statutory provisions under which the federal courts had implied a cause of action is itself evidence that Congress affirmatively intended to preserve that remedy." Id. 102 S.Ct., at 1841 (footnote omitted). Turning to the 1974 Act's legislative history, Justice Stevens found additional evidence that the Act's punitive and remedial provisions were intended to supplement, rather than to replace, the remedy that the courts had already provided. See, id., at 1842-44. Justice Powell, in dissent, challenged both steps of the majority reasoning. He first maintained that the lower court rulings relied upon by the majority had been incorrectly decided. Resting the decision on Congress' purported recognition of such faulty case law, he found, usurped Congress' 677 power to define substantive rights and thereby violated the separation of powers. With respect to legislative history, Justice Powell's sifting of the voluminous hearings and reports on the Act disclosed evidence that Congress had planned a remedial scheme that denied a role for private causes of action or, at best, was unaware that such remedies existed. Given that the violations of the CEA which were at issue in Curran did not include Section 4c of the CEA, the court finds that that case is not controlling. The decision addressed the anti-fraud provisions of the Act. Compare 7 U.S.C. § 6b with 7 U.S.C. § 6c (while § 6b defines unlawfulness for an agent to act in such a way on or on behalf of another person, § 6c simply defines unlawfulness as to an agent without regard to any individual or entity for whom that person acts). As such, the source of plaintiff's right must be found, if at all, in the substantive provisions of the Act which he seeks to enforce, and not solely by reference to other provisions contained in the statute. Touche Ross & Co. v. Redington, 442 U.S. 560, 577, 99 S. Ct. 2479, 2489, 61 L. Ed. 2d 82 (1979). Therefore, this court is required to conduct an independent inquiry into the validity of an implied right of action under Section 4c. The starting point for such an inquiry is found in Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975). In that case, the Supreme Court outlined the various factors relevant to determining whether a private right of action is implicit in a statutory scheme: First, is the plaintiff "one of the class for whose especial benefit the statute was enacted" ... that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one ...? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? Id. at 78, 95 S. Ct. at 2088 (citations omitted). It is apparent from Supreme Court cases since Cort v. Ash that the first two factors are most significant, "with the other two Cort factors ignored except as breaks on the first two." L. Loss, Securities Regulation 1104 (1983). The first Cort factor apparently is a codification of the statutory tort doctrine: When a legislative provision protects a class of persons by proscribing or requiring certain conduct but does not provide a civil remedy for the violation, the court may, if it determines that the remedy is appropriate in furtherance of the purpose of the legislation and needed to assure the effectiveness of the provision, accord to an injured member of the class a right of action, using a suitable existing tort action or a new cause of action analogous to an existing court action. Restatement (Second) of Torts § 874A (1979). The significance of this criterion is displayed in Cannon v. University of Chicago, 441 U.S. 677, 99 S. Ct. 1946, 60 L. Ed. 2d 560 (1979), where the Court found an implied right of action to enforce Title IX's prohibition against sex discrimination in educational institutions receiving federal financial assistance. The Court held that since Title IX explicitly conferred a benefit upon victims of sex discrimination, the ambiguous legislative history of Title IX did not militate against the implication of a private right of action. In contrast to Cannon, the Court in Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S. Ct. 2479, 61 L. Ed. 2d 82 (1979), denied a private right of action to enforce Section 17(a) of the 1934 securities act despite the past implication of private rights of action under Section 10(b) and 14(a) of the 1934 Act. Significantly, the Court found that Section 17(a) of the Act does not by its terms confer a right upon any particular class of plaintiffs. Likewise, in Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S. Ct. 242, 62 L. Ed. 2d 146 (1979), the Court refused to 678 infer a private right of action for damages under Section 206 of the Investment Advisors Act, which provides as follows: It shall be unlawful for any investment advisor, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly (1) to employ any device, scheme, or artifice to defraud any client or prospective client; (2) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client; (3) ... knowingly to sell any security or purchase any security from a client ... without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction.... (4) to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative .... 15 U.S.C. § 80b-6. In Lewis, the Court stated that "the mere fact that the statute was designed to protect advisors' clients does not require the implication of a private cause of action for damages on their behalf," 444 U.S. at 24, 100 S.Ct. at 249, and focused on the elaborate framework of administrative judicial vehicles for the enforcement of this section, concluding: "In view of these express provisions ... it is highly improbable that `Congress absentmindedly forgot to mention an intended private action.'" Id. at 20, 100 S. Ct. at 247 (citation omitted). The juxtaposition of Section 4c with Section 4b displays that plaintiff herein is not singled out as one of a class of identifiable beneficiaries for whose "especial benefit the statute was enacted." Cort, 422 U.S. at 78, 95 S. Ct. at 2088. Section 4c rather merely makes unlawful certain specious or meretricious transactions. Indeed, the syntax or formal structure of Section 4c is similar to that statute in Lewis which was found not to imply a private right of action. In contrast, Title IX has an "unmistakeable focus on the benefited class." Cannon, 441 U.S. at 691, 99 S. Ct. at 1955. Moreover, the entire history of commodities regulation, in contrast to securities regulation, suggests that insuring the integrity of the market system, rather than merely protecting individual customers, has been the motivating force behind congressional legislation. 1 Securities Fraud & Commodities Fraud, at 82.363. Therefore, in evaluating Section 4c under the first Cort factor, the court concludes that Section 4c of the CEA does not entail an especial benefit to plaintiff. The second prong of the Cort analysis, and perhaps the most dispositive, inquires as to whether there is any indication of legislative intent, explicit or implicit, either to create or deny an implied right of action. 422 U.S. at 78, 95 S. Ct. at 2088. As was stated in Curran: In determining whether a private cause of action is implicit in a federal statutory scheme when the statute by its terms is silent on that issue, the initial focus must be on the state of the law at the time the legislation was enacted. More precisely, we must examine Congress' perception of the law that it was shaping or reshaping. When Congress enacts new legislation, the question is whether Congress intended to create a private remedy as a supplement to the express enforcement provisions of the statute. When Congress acts in a statutory context in which an implied private remedy has already been recognized by the courts, however, the inquiry logically is different. Congress need not have intended to create a new remedy, since one already existed; the question is whether Congress intended to preserve the preexisting remedy. Curran, 102 S.Ct. at 1839. While the split on the Court in Curran was based not on implied-action analyses but on conflicting readings of legislative history and differing assessments of the importance Congress attached to existing case law, it is apparent from Curran that the contemporary legal context out of which the statute was legislated is a significant concern of all the justices. As the majority stated: 679 In view of the absence of any dispute about the proposition prior to the decision of Cort v. Ash in 1975, it is abundantly clear that an implied cause of action under the CEA was part of the "contemporary legal context" in which Congress legislated in 1974. (Citation omitted). In that context, the fact that a comprehensive reexamination and significant amendment of the CEA left intact the statutory provisions under which the federal courts had implied a cause of action is itself evidence that Congress affirmatively intended to preserve that remedy. 102 S.Ct. at 1841 (footnote omitted). No such contemporary legal context exists with respect to Section 4c. In other words, no comparable congressional approval or acquiescence exists with respect to this section of the CEA. Indeed, one district court, two years prior to the decision in Curran, and in a circuit which held that private individuals could sue to enforce the anti-fraud provisions of the Act, held that subsections (b) and (c) of Section 4c do not imply a private right of action. Stone v. Saxon & Windsor Group, Ltd., 485 F. Supp. 1212 (N.D.Ill.1980). In summary, Section 4c of the CEA does not provide such a history of case law that is present in Section 4b so as to conclude that Curran is controlling. Finding neither that plaintiff is one of the class for whose especial benefit Section 4c was enacted nor any indication of legislative intent to create such a remedy, this court refuses to imply a right of action under Section 4c of the CEA. This decision is a function both of the Cort v. Ash analysis and recent decisions of the Supreme Court, which have generally limited the availability of implied causes of action. See generally, Stewart & Sunstein, Public Programs and Private Rights, 95 Harv.L.Rev. 1193, 1304-05 (1982) (The commentators note that the Supreme Court's reluctance to find implied actions is of recent origin. Cases before 1970 generally sanctioned private actions, notwithstanding congressional silence or ambiguity, when civil liability was appropriate to effectuate a statute's purpose.). Compare Cort v. Ash, supra, with Texas & Pacific Railway Co. v. Rigsby, 241 U.S. 33, 39, 36 S. Ct. 482, 484, 60 L. Ed. 874 (1916). Accordingly, defendants' motion to dismiss Count VII for failure to state a claim upon which relief can be granted on the ground that no private right of action exists under that section of the CEA is GRANTED. V. Defendant Anthony Giarletta (Giarletta) is a resident of the State of New York, whose business address is in that state. Amended Complaint, ¶ 10. Defendant has lived in the State of New York since at least December of 1972. Affidavit of Giarletta, ¶ 1. This defendant has never worked, lived, or resided in Georgia, has never owned or rented any real property in Georgia, and at no time since this defendant has been employed or has been a limited partner in Bear Stearns has he been to Georgia. Id., ¶ 4. He now moves, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss all counts and claims as against him individually. Accordingly, the question presented is whether defendant Giarletta is subject to the personal jurisdiction of this court. Initially, the court notes that jurisdiction is alleged in this action pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa. This section provides that "process ... may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found," and permits service in a foreign country. As such, given the nationwide service of process under Section 27, the necessary nexus as to personal jurisdiction must be found between the United States and the defendant. In other words, while a defendant may not be called upon to defend in a particular tribunal unless he has had "minimal contacts" with the state which would exercise jurisdiction over him, Hanson v. Denckla, 357 U.S. 235, 251, 78 S. Ct. 1228, 1238, 2 L. Ed. 2d 1283 (1958), here it is not the State of Georgia but the United States which would exercise its jurisdiction. See Garner v. Enright, 71 F.R.D. 656, 660 680 (E.D.N.Y.1976). As a leading treatise has stated: The principles of International Shoe are grounded upon concepts of territorial limitations on the power of the respective states to subject non-residents to the jurisdiction of their courts. Accordingly, in federal question litigation where Congress has provided for nationwide service of process, there is no due process requirement of "minimal contacts" to justify the exercise of jurisdiction by the federal courts. 2 J. Moore & J. Lucas, Moore's Federal Practice, ¶ 4.25[5] (2d Ed. 1981). "And plainly, where, as here, the defendants reside within the territorial boundaries of the United States, the `minimal contacts,' required to justify the federal government's exercise of power over them, are present. Indeed, the `minimal contacts' principle does not, ... seem particularly relevant in evaluating the constitutionality of in personam jurisdiction based on nationwide ... service of process." Mariash v. Morrill, 496 F.2d 1138, 1143 (2d Cir.1974). Accord, Fitzsimmons v. Barton, 589 F.2d 330 (7th Cir. 1979). Therefore, the court concludes that personal jurisdiction over defendant Giarletta is satisfied pursuant to Section 27 of the Securities Exchange Act, inasmuch as this defendant is a resident of the United States. Furthermore, this court concludes that the nationwide service of process provided in the Act is sufficient to support in personam jurisdiction over defendant Giarletta for the purpose of holding him to answer the pendent or ancillary non-federal claims presented. See Murphey v. Hillwood Villa Associates, 411 F. Supp. 287, 293 (S.D. N.Y.1976); Emerson v. Falcon Manufacturing, Inc., 333 F. Supp. 888 (S.D.Tex.1971). See generally, Annot., 8 ALR Fed. 511 (1971). Accordingly, defendant Giarletta's motion to dismiss all counts and claims against him individually, pursuant to Fed.R.Civ.P. 12(b)(2), on the ground that he is not subject to the personal jurisdiction of this court, is DENIED. VI. In Count XI, plaintiff alleges a violation of RICO. Specifically, plaintiff avers the following. Defendants have engaged in fraudulent practices, on one or more occasions, in the purchase and sale of securities and commodities during the last ten years. Amended Complaint, ¶ 127. Defendants participated in, aided and abetted, or conspired among themselves to conduct unlawfully affairs through a pattern of racketeering activity in the pursuit of business enterprises and affairs in interstate commerce. Id., ¶ 129. As a proximate result of the conduct of defendant Paine Webber, defendant Bear Stearns, and defendant Bowman, plaintiff has been damaged. Id., ¶¶ 130-32. Defendants advance several arguments in support of their contention that plaintiff's RICO claim fails to state a claim upon which relief can be granted, including the argument that plaintiff's failure to allege that defendants are associated with organized crime is fatal to his RICO claim. While the court specifically rejects this argument, the court concludes that plaintiff's claim under RICO must be dismissed. THE STRUCTURE OF RICO The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, Title IX of the Organized Crime Control Act, Pub.L. No. 91-452, 84 Stat. 922 (1970), seeks to halt organized crime's infiltration of the American economy by creating sanctions and remedies against defendants who engage in racketeering activity to operate or gain control of business enterprises. Id., 84 Stat. at 923 (Statement of Findings and Purpose). Section 1964(c) provides for a private right of action for treble damages: Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States District Court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee. 681 18 U.S.C. § 1964(c). Section 1962 makes it unlawful to invest funds derived from a pattern of racketeering activity in an enterprise engaged in interstate commerce, to operate or acquire an interest in any such enterprise through a pattern of racketeering activity, to conduct or participate through a pattern of racketeering activity in the affairs in any such enterprise, or to conspire to violate any of these provisions. Id., § 1962(a)-(d). "Racketeering activity" includes any offense involving fraud in the sale of securities. Id., § 1961(1)(D). A "pattern" consists of two or more such acts committed within ten years of each other. Id., § 1961(5). A. The seminal case which held that a plaintiff in a civil RICO action must prove the defendant's affiliation with organized crime is Barr v. WUI/TAS, Inc., 66 F.R.D. 109 (S.D.N.Y.1975). In Barr, the district court refused to allow plaintiffs to amend their complaint against a telephone answering service to include a RICO claim predicated on the mailing of fraudulent bills unless they showed the defendant's membership in "a society of criminals operating outside of the law." Id. at 113. Several courts have followed Barr's reading of a requirement of affiliation with organized crime into the statute. See, e.g., Moss v. Morgan Stanley Inc., 553 F. Supp. 1347, 1361 (S.D.N.Y.1983); Wagner v. Bear Stearns & Co. [1982-83 Transfer Binder] Fed.Sec.L. Rep. (CCH) ¶ 99,032 (N.D.Ill. Sept. 17, 1982) (RICO not intended "to supplant existing federal regulations of securities fraud, at least in the absence of any alleged involvement of organized crime as that term is commonly used and understood."); Waterman Steamship Corp. v. Avondale Shipyards, Inc., 527 F. Supp. 256, 260 (E.D. La.1981); Adair v. Hunt International Resources Corp., 526 F. Supp. 736, 747 (N.D.Ill. 1981). Several courts, however, have rejected the reading of such a requirement into the statute or declined specifically to follow Barr. See, e.g., Schacht v. Brown, 711 F.2d 1343 (7th Cir.1983) ("We agree that the civil sanctions provided under RICO are dramatic, and will have a vast impact on the federal-state division of substantive responsibility for addressing illegal conduct, but, like most courts who have considered this issue, we believe that such dramatic consequences are necessary incidents of the deliberately broad swath Congress chose to cut in order to reach the evil it sought; we are therefore without authority to restrict the application of the statute."); Hanna Mining Co. v. Norcen Energy Resources Ltd., 574 F. Supp. 1172 [1982-83 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 98,742 (N.D.Ohio June 11, 1982). While the requirement of an affiliation with organized crime may appear to follow from the title of the provisions and the Act that contains them, and to result from the potential publicity that RICO actions attract and the consequent damage to a defendant's reputation, see Barr, 66 F.R.D. at 112-13 (court expresses concern about the "patently unfair" implication "that defendant is somehow involved in organized crime" that could arise from "[t]he mere granting of leave to file a [RICO] claim"), this court believes that the creation of an "organized crime" nexus requirement is improper. First, several representatives expressed fear that any attempt to define the concept of "organized crime" with precision would cast doubt on the statute's constitutionality. 116 Cong.Rec. 35, 293 (1970) (statement of Rep. Poff); id., at 35, 343-44 (statement of Rep. Cellar). While Representative Biaggi proposed an amendment that would have specifically criminalized membership in the Mafia or La Cosa Nostra, Congress rejected it. Id., at 35, 346. Second, Congress did not want to reduce RICO's potency by imposing a burden of proof that would be practically impossible to meet. See, e.g., 116 Cong.Rec. 586 (1970) (statement of Sen. McClellan) (organized criminals able to "insulate" themselves); id., at 601 (statement of Sen. Hruska) (difficulty in proving link between criminal group members and illicit activities they sponsor). In responding to criticism that RICO's provisions were over-inclusive, Senator McClellan, one of the sponsors of the bill, stated, "the Senate report does not claim ... that the listed offenses are committed 682 primarily by members of organized crime, only that those offenses are characteristic of organized crime." McClellan, The Organized Crime Act (S. 30) or its Critics: Which Threatens Civil Liberties?, 46 Notre Dame Law. 55, 142 (1972), cited in Note, Civil RICO: The Temptations and Impropriety of Judicial Restrictions, 95 Harv.L.Rev. 1101, 1109 n. 47 (1982) (hereinafter cited as Civil RICO). Finally, a "court's preoccupation with possible implications of links to organized crime is self-fulfilling; RICO claims can stigmatize defendants only, if courts restrict the applicability of the broad statutory language to proven organized criminals." Civil RICO, 95 Harv.L.Rev. at 1107. Therefore, inasmuch as Congress explicitly rejected an affiliation with organized crime requirement as unworkable and possibly unconstitutional, and inasmuch as Congress has given statutory content to the notion of "organized crime" by utilizing a "pattern of racketeering activity" predicate for section 1962 violations, the court rejects defendants' argument that plaintiff's failure to allege that defendants are associated with organized crime is fatal to plaintiff's RICO claim. B. There are eight elements which must be pled before a plaintiff may avail himself of the enhanced damage and attorney's fee provision of RICO. These elements are as follows: (1) That the defendant (2) through the commission of two of the enumerated predicate acts, (3) which constitute a "pattern" of (4) "racketeering activity," (5) directly or indirectly participates in the conduct of (6) an "enterprise," (7) the activities of which affect interstate or foreign commerce, and that (8) plaintiff was injured in his business or property by reason of such conduct. Moss v. Morgan Stanley Inc., 719 F.2d 5, No. 1281 (2d Cir. Sept. 9, 1983). RICO has not been around long enough for rule makers to address it specifically. It seems, however, to this court at least that there are many sound reasons for requiring that, like fraud, it must be pled with particularity. First, the mere invocation of the statute has such an in terrorem effect that it would be unconscionable to allow it to linger in a suit and generate suspicion and unfavorable opinion of the putative defendant unless there is some articulable factual basis which, if true, would warrant recovery under the statute. Second, the concepts within the statute are so nebulous that if the cause of action were only generally pled, a defendant would have no effective notice of a claim showing that the pleader is entitled to relief. Fed.R. Civ.P. 8(a)(2). Therefore, the court believes that it is appropriate to require that RICO be pled with the same particularity that is required in the pleading of fraud. Fed.R. Civ.P. 9(b). See Segal v. Gordon, 467 F.2d 602, 607 (2d Cir.1972). See generally 5 C. Wright & A. Miller, Federal Practice & Procedure § 1296 (1969). Because of the nature of the charge, the court should neither assume without inquiry that the tenets of Rule 11 of the Federal Rules of Civil Procedure have been honored, nor accept the allegations made on information and belief. See 2A J. Moore & J. Lucas, Moore's Federal Practice, ¶ 9.03 at 9-26 (1983). A complaint alleging RICO, like a complaint alleging fraud, should be filed only after a wrong is reasonably believed to have occurred. It should be a vehicle to right a wrong, not to find one. See Segal, 467 F.2d at 607-08. Further, it is noted that the predicate acts must be criminal acts. 18 U.S.C. § 1961(1). Characterizing some event as criminal does not make it so. An "offense" must be well founded and based upon probable cause. Unless the sufficient facts are alleged by either showing previous convictions or setting out probable cause, neither the defendant nor the court can ascertain what prior conduct is said to constitute a predicate act; nor can the defendant or the court determine whether a predicate act has been committed. Therefore, it is necessary that either a prior conviction or probable 683 cause be alleged with reference to the predicate acts. Bache, Halsey, Stuart, Shields, Inc. v. Tracy Collins Bank & Trust Co., 558 F. Supp. 1042, 1045 (D.Utah 1983). Even where other counts of the complaints allege the predicate acts, adoption by reference is not advisable. Mauriber v. Shearson/American Express, Inc., 546 F. Supp. 391, 396 (S.D.N.Y.1982). These principles will be applied in reviewing the sufficiency of the pleadings in the case at bar. It is not at all clear who the defendants are in the RICO count. The only ones mentioned specifically in the counts are Paine Webber, Bear Stearns and Bowman. Giarletta and Hudson are not named in the count, although they are mentioned in the counts which are adopted by reference. The plaintiff adopts by reference Count I, alleging fraud in the sale of securities while Bowman was employed first at Paine Webber and then at Bear Stearns. He also adopts by reference Count VI, alleging fraud in connection with the sale of commodities. If the purpose of the adoption was to allege predicate offenses, the most generous characterization is that he has alleged one offense as to Bowman or one offense with Bowman and Paine Webber, and another with Bowman and Bear Stearns. Count VI does not allege an offense involving fraud in the sale of securities or any other offense enumerated in 18 U.S.C. § 1961. Next, plaintiff alleges on information and belief that "Paine Webber, Bear Stearns and Bowman have engaged in fraudulent practices on one or more occasions, in the purchase and sale of securities and commodities during the last ten years." Amended Complaint, ¶ 127. This will not do for the reasons stated. Plaintiff finally alleges that the two brokerage firms and Bowman participated in and conspired to conduct the affairs "of business enterprises and affairs in interstate commerce" through a pattern of racketeering activity. (Emphasis added). Assuming without deciding that this is sufficient to allege these two elements, the court notices that here the plaintiff comes no closer than this to defining the enterprise. In his brief, by hyperbole, he contends that the complaint "clearly" alleges the existence of two enterprises (i) Paine Webber, Hudson and Bowman and, (ii) Bear Stearns, Giarletta, and Bowman. Accepting this assertion, the court cannot, even under the most generous interpretation, find but one predicate act for each enterprise. Accordingly, the complaint fails to state a claim in this count upon which relief may be granted. Also, contrary to his brief, he does not identify the enterprise. The court in this case, as it should in any case, will of course consider a motion for attorney's fees under 28 U.S.C. § 1927 or for sanctions under Fed.R.Civ.P. 11, if it can be shown that at the time of the filing of the amended complaint the attorneys for the plaintiff who signed the complaint did not have a good ground to believe that the relief requested was warranted under the then known facts. See also Code of Professional Responsibility DR7-102(A)(1), (2) (1979). CONCLUSION Defendants' motions to dismiss, pursuant to Rule 12(b) are hereby GRANTED IN PART and DENIED IN PART. Specifically, the court concludes the following: (a) Plaintiff's claims under Section 10(b) and Rule 10b-5, Counts I and II, shall not be dismissed for failure to state a claim upon which relief can be granted, on the grounds that (i) the claims are not barred by the applicable statute of limitations, and (ii) the accounts upon which plaintiff bases his claims constitute "securities" within the meaning of Howey; (b) Plaintiff's claims under Section 10 of the Fair Business Practices Act of 1975, Count V, shall be dismissed, on the ground that the claims are not cognizable under the terms of the Act; (c) Plaintiff's claims under the Commodity Exchange Act shall not be dismissed on the ground that they are barred by the applicable statute of limitations; *684 (d) Plaintiff's claim pursuant to Section 4c of the Commodity Exchange Act, Count VII, fails to state a claim upon which relief can be granted, since there is no implied right of action under that section; (e) Plaintiff's claims against defendant Giarletta shall not be dismissed on the ground that he is not subject to the personal jurisdiction of this court; and (f) Plaintiff's claim under RICO, Count XI, shall be dismissed for failure to plead with particularity. NOTES [1] To the extent that defendants argue that since "securities" are not involved in this case and since the CEA governs the conduct of parties in commodities markets, the CEA precludes the application of the SEA through preemption, the analysis in II.A. of this order regarding preemption also applies.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2328204/	473 F. Supp. 2d 912 (2007) Edna SEALS, Plaintiff v. CORRECTIONAL MEDICAL SERVICES, INC., Defendant. No. 4:05CV1638 JLH. United States District Court, E.D. Arkansas, Western Division. January 30, 2007. 913 914 Stephen E. Fisher, Fisher Law Firm, Little Rock, AR, for Plaintiff. Robert D. Moreland, Shellie Lynn Goetz, Baker & Daniels, Fort Wayne, IN, Stephen W. Jones, Jack, Lyon & Jones, P.A., Little Rock, AR, for Defendant. OPINION AND ORDER HOLMES, District Judge. This is an employment discrimination case. Edna Seals, an African-American female, brought claims against her former employer, Correctional Medical Services, Inc., alleging age discrimination under the Age Discrimination in Employment Act of 1964 (29 U.S.C. § 631 et seq.), race discrimination and retaliation under Title VII of the Civil Rights Acts (42 U.S.C. § 2000e et seq.), and intentional infliction of emotional distress under Arkansas law. The defendant has moved for summary judgment. For the reasons stated below, this motion is granted in part and denied in part. 915 A court should grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis of its motion and identifying the portions of the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Group Health Plan, Inc. v. Philip Morris USA, Inc., 344 F.3d 753, 763 (8th Cir.2003). When the moving party has carried its burden under Rule 56(c), the non-moving party must "come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (quoting FED.R.CIV.P. 56(e)). The non-moving party sustains this burden by showing that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson, 477 U.S. at 250, 106 S. Ct. 2505. When a non-moving party cannot make an adequate showing on a necessary element of the case on which that party bears the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex 477 U.S. at 323, 106 S. Ct. 2548, In deciding a motion for summary judgment, the Court must view the facts and inferences in the light most favorable to the party opposing summary judgment. Boerner v. Brown & Williamson Tobacco Corp., 260 F.3d 837, 841 (8th Cir.2001) (citing Rabushka v. Crane Co., 122 F.3d 559, 562 (8th Cir.1997)). If the evidence would allow a reasonable jury to return a verdict for the non-moving party, summary judgment should be denied. Derickson v. Fidelity Life Assoc., 77 F.3d 263, 264 (8th Cir.1996) (citing Anderson, 477 U.S. at 248, 106 S. Ct. 2505). The Eighth Circuit has said that summary judgment should seldom be granted in discrimination cases where inferences are often the basis of the claim. Duncan v. Delta Consol. Indus., Inc., 371 F.3d 1020, 1024 (8th Cir.2004) (citing Breeding v. Arthur J. Gallagher & Co., 164 F.3d 1151, 1156 (8th Cir.1999)); Bassett v. City of Minneapolis, 211 F.3d 1097, 1099 (8th Cir.2000). But see Bainbridge v. Loffredo Gardens, Inc., 378 F.3d 756, 762 (8th Cir. 2004) (Arnold, J. dissenting). I. Edna Seals, a Licensed Practical Nurse, began working for Correctional Medical Services, Inc., in July 1999. CMS provides healthcare services and medical staffing to jails and prisons throughout the United States, including certain facilities in Arkansas. Seals began working for CMS at the. Pine Bluff Diagnostic Hospital, but was transferred to the Tucker Maximum Security Prison at her request about three months later. Seals continued working at Tucker for the remainder of her employment with CMS. In this position, she dispensed medications to inmates, provided treatment to inmates, and reported sick calls. Deborah Harris, CMS's Director of Nursing, and Charlotte Green, a supervisory employee, conducted Seals's annual performance evaluation on August 5, 2004. This evaluation showed that Seals met or exceeded the requirements of her position in most respects, but fell below the requirements in a few areas of performance. 916 In the comments section of the evaluation form, Harris wrote that Seals was a "valuable asset to the team of nurses," and Seals wrote, "I enjoy working here as a nurse." Until the time that she received this evaluation, Seals enjoyed working at CMS and did not experience any type of behavior that made her think that her working conditions were intolerable. On September 3, 2004, Seals failed to, pass medications to barracks five, six, seven, and eight at Tucker, which was part of her job duties. One week later, Harris gave Seals a verbal counseling because of Seals's error. Seals testified in her deposition that she believed that she did not have enough time at work to complete all of her job duties and that this disciplinary action was unfair. When asked, "But the reason you think it's unfair is because you didn't have enough time, not because you think they were doing it because of your age or your race," Seals responded, "Well, on that; no." Seals now asserts that she "believed Harris wanted her gone because of her race and age." After receiving the verbal counseling, Seals called Paul Torrez, CMS's Regional Manager, and scheduled a meeting for September 13, 2004. Seals scheduled this meeting, in part, because of the verbal counseling she had received. Seals met with Torrez for about one hour. During this meeting, Seals told Torrez that a white nurse, Lisa Anderson, was allowed to work and play games on a computer, but black nurses were questioned for using it. Seals also told Torrez that Seals had to come in to work later than other nurses and that she therefore did not have enough time to prepare for "pill passes." Torrez told Seals that he would attend a staff meeting at Tucker and talk with other employees, regarding Seals's concerns. Seals was satisfied with her meeting with Torrez. Torrez attended the next staff meeting at Tucker and spoke with other CMS employees. Anderson was disciplined for playing games on the computer. On September 14, the day after Seals's meeting with Torrez, Harris gave Seals an Action Plan for Time Management. This action plan documented a change in Seals's work hours from a 9:00 a.m. start time to an 8:00 a.m. start time and changed her shifts from Monday through Friday to Tuesday through Friday. The action plan also identified the tasks Seals was expected to perform during her shift as the pharmacy nurse. Seals testified in her deposition that this change in working hours did not entirely alleviate her problem with regard to having enough time to complete her job duties, but it was an improvement. She also testified that she and Harris "weren't on bad terms" at that time. Seals nevertheless refused to sign the action plan, telling Harris that she would not sign it without talking to her lawyer. On November 18, 2004, Seals erred in performing her job duties in that she did not "sign out" two Tylenol # 3 tablets in the narcotics book or the medication administration record ("MAR"); she gave an inmate medications that were intended for a different inmate, rather than retrieving the tablets from stock medication; and she failed to count narcotics at the end of her shift. Seals asserts that she could not sign out the Tylenol # 3 tablets because "the MAR had been pulled by another nurse:" that the inmate who was given tablets intended for a different inmate actually got the correct medication, so no one was harmed; and that she did not count narcotics "because a white nurse (RN Julia Mitchell) who was supposed to count with her refused to do so." On November 19, Harris gave Seals a written counseling for the errors Seals had 917 made the previous day. With the exception of Mitchell, Seals was not aware of any other CMS employees who failed to count narcotics at the end of their shifts but were not disciplined. Seals did not think that she was given the written counseling, however, because of her race. When asked in her deposition whether she thought her age had anything to do with it, Seals testified, "Maybe not, but it just sounds like she was out to get me, because I messed up." The record does not reveal Mitchell's age. On November 29, 2004, Seals gave an inmate Tylenol # 3; however, she cannot recall if she gave him one tablet or two. That day she also gave another inmate Tylenol # 3 tablets after the doctor had discontinued the prescription. Seals did not check the MAR before giving the inmate this medication, but asserts that "another nurse, Vera Miller (white female) had filed the MAR making it unavailable to Ms. Seals. Vera Miller was not disciplined for her actions." On November 30, Harris gave Seals a final written warning for the errors Seals made on November 29. Seals did not feel that this final written warning was related to her race or age. Seals did not know of any other CMS employees who gave the wrong narcotic medication to an inmate and who did not receive discipline for the error. On December 1, the day after receiving the final written warning, Seals went to work at 8:00 a.m. When Seals arrived at work, Harris asked Seals if Seals had finished updating the MARs. Seals checked with co-worker James Hamilton to find out if he had finished the MARs, as Hamilton had previously told Seals that he would help with this task.. Hamilton had not finished the MARs. Seals told Harris that the MARs were not finished. Harris told Seals that Seals had plenty of time to complete the MARs, the MARs were her responsibility, and she would have to complete them. Seals felt that she could not complete this task and also prepare for medication passes. Miller suggested that Seals complete the MAR updates in the evening. Seals told Miller that Harris would "have my tail" if she did not update the MAR before evening. Seals asked Miller if Miller would help her, but Miller responded that she was too busy. Seals then asked Harris for help, and Harris responded that she and the other nurses were busy and could not help. After Harris told Seals that no one was. available to help her, Seals decided to call Torrez because she felt that "she could not get through to Harris that Seals needed help." Seals picked up a telephone book to find Torrez's telephone number. According to Seals, as she was holding the book Harris grabbed it and told Seals that Harris would call Torrez. Seals did not let go of the book. After less than one minute of both of them tugging on it, Harris let go. After Harris let go of the book, Seals felt weak and asked a Certified Nursing Assistant ("CNA") to take her blood pressure. At that time, Seals took medication to control her blood pressure. When the CNA took Seals's blood pressure, at approximately 8:45 a.m., it was 175 over 97. Seals then told Harris that she needed to go to a doctor. Seals testified that Harris told her, "What you better do is get on back to work." Seals did not return to work. She called her husband and told him to meet her at their home. Seals then left Tucker and drove home. Seals saw her doctor later that day. During her visit with her doctor, Seals's blood pressure was 142 over 100, and 918 ordered her to take off work for five days due to hypertension. Seals went on medical leave and never returned to work at CMS, but she did not resign immediately. During the time that Seals was off on medical leave, CMS paid her 58 hours of "Paid Time Off' compensation. On December 7, 2004, Seals sent a letter to Torrez explaining all of her complaints about CMS. Seals admits that this letter was a complete representation of her complaints, as she did not exclude any complaint or grievance from the letter. In the letter, Seals alleged that she had been treated less favorably than certain white nurses on some occasions and that Harris had retaliated against her for meeting with Torrez on September 13. Seals did not allege that she was treated less favorably than younger nurses, harassed about, her age, or otherwise subjected to any form of age discrimination. Finally, Seals stated that she enjoyed her job at CMS and considered it a privilege to work for the company. Some time during the first part of December 2004, Seals applied for a job with Golden Years Nursing Home. Around the middle of that month, Golden Years offered Seals a job. Seals told Golden Years that she was employed with CMS, but that she planned to resign her position at CMS to work at Golden Years. Sometime after December 21, Seals received a memo from Torrez in response to her December 7 letter. Torrez stated in his letter to Seals that he had investigated her complaints and found no evidence that she was treated differently than other employees due to her race. He further found that her disciplinary actions were the, result of her performance and that her work schedule was based upon the needs of her work unit. This letter, imposed no discipline on Seals. On December 27, Seals saw her doctor again. Seals told him that she had decided to resign from her job and take a new job, and Seals's doctor told her that she could return to work. That day Seals delivered her resignation letter to CMS. This letter stated that she resigned "with much regret of having to leave this job." Seals further stated in the letter, "I have enjoyed working here," but "I must resign because of circumstances beyond my control." When Seals resigned from CMS, her hourly rate of pay was $15.19. On January 3, 2005, Seals started working for Golden Years at an hourly rate of $15.27. She presently earns $16.97 per hour at Golden Years. When asked during her deposition to identify what circumstances were beyond her control, prompting her resignation, Seals identified the following: (1) she could not get through to the staff that she needed help; (2) she was "stressed out;" (3) she was stressed because somebody was watching over her shoulder; and (4) the disciplinary actions issued by Harris. No one at CMS told Seals that she had to resign or that anyone at CMS wanted her to resign. Seals was never humiliated while she was employed by CMS. Seals further testified that, other than the incident in which she and Harris tugged on the telephone book, she never felt physically threatened or assaulted while she was employed with CMS. Seals believed that CMS thought she would not resign. Seals testified, "I believe that they might have not thought that I was going to quit. That is what I am thinking. They probably figured that I would just hang on." When asked during her deposition to identify in what manner CMS retaliated against her, Seals identified the following: 919 (1) the written disciplinary actions she received; and (2) increased workload and stress level. Seals never heard anyone making any racial slurs, racial jokes, or statements about her race while she was employed With CMS. The only remark Seals ever heard anyone make about her age was one incident when Harris said, "We are not as young as we used to be." Seals has produced the affidavits of some of her coworkers, however, in support of her allegations of race and age discrimination. Seals's former supervisor, Henrine Joyner, testified that Seals was treated differently than younger, white nurses at CMS in that "she was required to do the same work in a shorter period of time;" she was required to performed the additional task of passing out "on-person medications;" and she was ridiculed on the job while other nurses were not treated in this manner. Joyner thus opined that "CMS treated Ms. Seals in an unfavorable manner due to her race and her age." Another employee at Tucker, Shirley Owney, testified that she observed that "[t]he white nurses were not made to work as much as the black nurses." Owney stated, "I believe that race was a factor in how Ms. Seals' supervisors treated her." Although Seals stated that she enjoyed her job at CMS, Seals has also produced other evidence that she received negative treatment there. Seals and another employee, Verna Kettle, both testified that Seals was required to work more weekends than other nurses, that Seals was denied time off work to attend the funeral of a family member, and that Harris treated Seals very rudely. II. Seals alleges that CMS discriminated against her on the basis of her age and race in four ways: (1) she was given more work to do in a shorter amount of time than younger, white nurses; (2) she was subjected to unfair disciplinary actions; (3) she was not hired for another position that was available, and this position was filled by a white nurse; and (4) she was constructively discharged. Seals further alleges that after she complained of race discrimination to Torrez, CMS retaliated against her by increasing her workload and taking unjustified disciplinary actions against her. A. Race Discrimination Under Title VII, an employer cannot discharge or otherwise "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race. . . ." 42 U.S.C. 2000e-2(a)(1). This provision prohibits disparate treatment of employees based on race, see Tatum v. City of Berkeley, 408 F.3d 543, 553 (8th Cir.2005), failure to hire or promote an employee due to his or her race, see Rose-Maston v. NME Hosps., Inc., 133 F.3d 1104, 1109-10 (8th Cir.1998), and constructive discharge, see Tatum, 408 F.3d at 551-52; Kerns v. Capital Graphics, Inc., 178 F.3d 1011, 1016-17 (8th Cir. 1999). 1. Disparate Treatment Because there is no direct evidence of discriminatory intent, Seals's disparate-treatment claim is analyzed under the burden-shifting framework set out in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). Under this framework, the plaintiff must first establish a prima facie case of discrimination by showing that (1) she belonged to a protected class, (2) she was qualified to perform her job, (3) she suffered an adverse employment action, and (4) she was treated differently than similarly-situated members of the unprotected class. Schoff-stall v. Henderson, 223 F.3d 818, 825 (8th 920 Cir.2000) (citing Breeding v. Arthur J. Gallagher & Co., 164 F.3d 1151, 1156 (8th Cir.1999)). If the plaintiff does so, the burden shifts to the employer to articulate a legitimate, nondiscriminatory reason for taking the adverse employment action. Hammer v. Ashcroft 383 F.3d 722, 724 (8th Cir. 2004). If the employer offers such a reason, the plaintiff must then present evidence sufficient to create a fact issue as to whether the employer's articulated reason is pretextual and to create a reasonable inference that race was a motivating factor. McCullough v. Real Foods, Inc., 140 F.3d 1123, 1127 (8th Cir.1998). CMS does not argue that Seals is not a member of a protected group or that she was not qualified to perform her job. CMS argues that Seals did not suffer an adverse employment action and has thus failed to establish the third element necessary for a prima facie case. "An adverse employment action is a tangible change in working conditions that produces a material employment disadvantage!' Spears v. Mo. Dep't of Corrs. & Human Res., 210 F.3d 850, 853 (8th Cir.2000). Termination, reduction in pay or benefits, and changes in employment that significantly affect an employee's career meet this standard, but minor changes or inconveniences do not. Id. Generally, poor performance evaluations or disciplinary citations do not in themselves constitute an adverse employment action. Id. at. 854. Seals has produced evidence that she was required to perform more tasks in less time at work than white nurses. Such a disparity in job requirements could produce a "material employment disadvantage" within the meaning of Title VII. Cf. Wilmington v. J.I. Case Co., 793 F.2d 909, 915 (8th Cir.1986) (supervisor's routine assignment of undesirable jobs to black employee, where white employees rarely received such assignments, was evidence of racial discrimination). Seals also testified that on one occasion she received a "written counseling" for failing to count narcotics, while a white nurse who failed to perform this task on the same date was not disciplined. As explained above, disciplinary citations do not ordinarily constitute an adverse employment action. The Eighth Circuit has noted, however, that negative employment reviews can constitute an adverse employment action in some circumstances. Green v. Franklin Nat'l Bank of Minneapolis, 459 F.3d 903, 916 n. 9 (8th Cir.2006). In this case, Seals testified that she was concerned about the disciplinary citations "because enough write-ups, you can lose your license." Assuming that this testimony is true, as the Court must for purposes of this motion for summary judgment, these citations could "significantly affect" Seals's career in nursing. Cf. Charlton v. Paramus Bd. of Educ., 25 F.3d 194, 200 (3d Cir.1994) ("[P]ost-employment blacklisting is sometimes more damaging than on-the-job discrimination. . . . Such would be the case with [the plaintiff] if her teaching certificate is revoked."). Seals has therefore produced evidence that she suffered an adverse employment action within the meaning of Title. VII, meeting the third element necessary for a prima facie case. The fourth element, that she was treated differently than similarly-situated members of the unprotected class, is established by the same evidence. The white nurses who allegedly were required to perform less work were similarly situated to Seals in their positions, and Mitchell, a white nurse, allegedly committed the same error as Seals but received no discipline. Because Seals has established a prima facie case of race discrimination, the burden shifts to CMS to articulate a legitimate, 921 nondiscriminatory reason for its alleged actions. See Hammer, 383 F.3d at 724. CMS has offered no reason for its alleged disparate treatment of Seals in requiring her to perform more job duties in less time than white nurses. While CMS asserts, and Seals admits, that failure to count narcotics is an important job duty and such failure is a legitimate reason for discipline, CMS has offered no reason for treating Seals differently than Mitchell in this regard. CMS has thus failed to meet its burden of stating a legitimate, nondiscriminatory reason for treating Seals differently than white nurses in the terms and conditions of her employment. CMS's motion for summary judgment as to Seals's Title VII disparate-treatment claim is denied. 2. Failure to Promote Seals alleges that CMS had "an opening for the day shift doctor's nurse that was not posted and Ms. Seals was not allowed to fill. A white nurse . . . was hired for that job." Although Seals does not explicitly allege that this position was more desirable than the position that Seals held at the time, the Court will treat this claim as one for failure to promote on the basis of race. "To establish a prima facie case in a failure-to-promote case, a plaintiff must show: (1) that she was a member of a protected group; (2) that she was qualified and applied for a promotion to an available position; (3) that she was rejected; and (4) that a similarly qualified employee, not part of a protected group, was promoted instead." Rose-Maston, 133 F.3d at 1109. Seals has failed to establish the elements of a prima facie case on this claim. Regarding the second element, Seals has not offered any evidence as to the required qualifications for the position, much less shown that she met those qualifications. See id. at 1110 (plaintiff failed to establish prima facie case where she offered no evidence of the qualifications necessary for the position she sought and no evidence of her own qualifications). Regarding the fourth element, Seals has produced no evidence of the qualifications of the white nurse who filled the position to show that they were "similarly qualified." CMS's motion for summary judgment as to Seals's failure-to-promote claim is granted. 3. Constructive Discharge "A constructive discharge occurs when an employee resigns after the employer has created an intolerable working environment in a deliberate attempt to compel such a resignation." Tatum v. City of Berkeley, 408 F.3d 543, 551 (8th Cir.2005). "To prove a case of constructive discharge, a plaintiff must show that: (1) `a reasonable person in her situation would find the working conditions intolerable' and (2) the employer . . . intended to force the employee to quit.'" Tatum v. Ark. Dep't of Health, 411 F.3d 955, 960 (8th Cir.2005) (quoting Gartman v. Gencorp, Inc., 120 F.3d 127, 130 (8th Cir.1997)). "Constructive discharge requires considerably more proof than an unpleasant and unprofessional environment." Jones v. Fitzgerald, 285 F.3d 705, 716 (8th Cir.2002). "Whether working conditions are sufficiently objectionable to support a claim for constructive discharge is determined by an objective standard, not the employee's subjective feelings." Spears, 210 F.3d at 854. The employee must give her employer a reasonable chance to work out the problems presented. Davis v. KARK-TV, Inc., 421 F.3d 699, 706 (8th Cir.2005); Duncan v. Gen. Motors Corp., 300 F.3d 928, 935-36 (8th Cir.2002). The intent element in a constructive discharge claim, however, "is satisfied by a demonstration that quitting was 922 `a reasonably foreseeable consequence of the employer's discriminatory actions.'" Breeding, 164 F.3d at 1159 (quoting Summit v. S-B Power Tool, 121 F.3d 416, 421 (8th Cir.1997)). Seals has produced evidence, through her deposition and the affidavits of other employees at Tucker, that she was ridiculed on the job, required to perform tasks that could not be completed in the time allowed, disciplined in allegedly unfair circumstances, required to work more weekends than other nurses, treated rudely by her superiors, denied time off work to attend the funeral of a family member, and told that she had "better . . . get on back to work" when she informed her supervisor that she was ill and needed to see a doctor. The parties do not dispute that Seals met with Torrez in September 2004 to discuss some of the problems that she allegedly experienced at work. Although Seals admits that Torrez addressed some of her concerns and that her working hours were adjusted to allow her more time to complete her duties, she also testified that her workload was increased. The parties do not dispute that when Seals attempted to contact Torrez again in December to address her concerns about her workload, Harris tried to physically take the telephone book away from her. Of course, CMS has presented evidence that Seals's working conditions were not intolerable and that she actually enjoyed her job. The role of the Court in determining a motion for summary judgment, however, is not to weigh the evidence or assess the credibility of witnesses. If a jury believes the testimony presented by Seals and her coworkers, the jury could reasonably conclude that Seals's working conditions would not be tolerable to a reasonable person, that she gave CMS an opportunity to work out the problem, and that her resignation was foreseeable under the circumstances. CMS's motion for summary judgment as to Seals's constructive discharge claim is therefore denied. B. Age Discrimination The Age Discrimination in Employment Act ("ADEA") makes it unlawful for an employer to discriminate against an employee on the basis of age if the employee is over 40 years old. 29 U.S.C. §§ 623(a), 631(a). Like Title VII, the ADEA prohibits discrimination with respect to compensation and terms, conditions, or privileges of employment. Id. 623(a)(1). Where, as here, the plaintiff puts forth no direct evidence of age discrimination, the Court must apply the McDonnell Douglas burden-shifting analysis, which first requires the plaintiff to demonstrate a prima facie case of age discrimination. Breeding, 164 F.3d at 1156. To do this, the plaintiff must show that: (1) she is within the protected class; (2) she was qualified to perform her job;" (3) she suffered an adverse employment action; and (4) persons outside the protected class were not treated in the same manner. Id. The burden then shifts to the employer to articulate a legitimate, nondiscriminatory reason for the adverse employment action. Id. If the employer does so, then the plaintiff must demonstrate that the employer's stated reason is pretextual and that the real reason for the adverse employment action was age discrimination. Id. at 1157. As with Seals's race discrimination claim, CMS does not argue that Seals is not a member of the protected class or that she was not qualified for her job. The analysis of Seals's prima facie case thus turns on the third and fourth elements. Seals offers less evidence to support her age discrimination claim than to support her race discrimination claim. 923 Nevertheless, she has produced evidence that she was required to do more work in less time than younger nurses and that she was ridiculed on the job in situations where those nurses were not. The analysis of Seals's age discrimination claim is thus the same as for her race discrimination claim on this issue. As explained above, requiring an employee to perform more tasks in a shorter amount of time than other employees is discrimination in the terms and conditions of employment that could rise to the level of an adverse employment action. This evidence is sufficient to meet the minimum threshold of evidence necessary to establish a prima facie case. See Davenport v. Riverview Gardens Sch. Dist., 30 F.3d 940, 944 (8th Cir.1994) (threshold of proof necessary to make a prima facie case of employment discrimination is minimal). CMS offers no reason for its alleged adverse action, and has thus failed to rebut Seals's prima facie case. CMS's motion for summary judgment as to Seals's age discrimination claim is therefore denied. C. Retaliation Title VII prohibits an employer from retaliating against an employee because he has "made a charge" of unlawful discrimination or has "participated in any manner in an investigation, proceeding, or hearing under this subchapter." Cross v. Cleaver, 142 F.3d 1059, 1071 (8th Cir.1998) (quoting 42 U.S.C. § 2000e-3 (a)). To establish a claim of retaliation in violation of Title VII, a plaintiff must show the following elements: (1) the plaintiff filed a charge of harassment or engaged in other protected activity; (2) the plaintiffs employer subsequently took adverse employment action against him; and (3) the adverse action was causally linked to the plaintiffs protected activity. Id. "Once this prima facie showing is made, the burden shifts to the employer to articulate a legitimate, nondiscriminatory reason for its actions, and, if the employer meets that burden, the presumption of retaliation disappears." Id. at 1071-72. If the employer does this, the plaintiff has the burden to identify specific facts in the record showing that the offered reason was merely pretextual and that unlawful retaliation was a motivating factor for the decision. E.E.O.C. v. Kohler Co., 335 F.3d 766, 773 (8th Cir.2003). The first element is not in dispute: Seals engaged in a protected activity when she complained to Torrez in September 2004 that black employees were receiving less favorable treatment at work than white employees. See Buettner v. Arch Coal Sales Co., Inc., 216 F.3d 707, 714 (8th Cir.2000) (Title VII's prohibition against retaliation is not limited to protection of employees who file suit; it "protects activities ranging from filing a complaint to expressing a belief that the employer has engaged in discriminatory practices"). As to the second element, CMS again argues that Seals did not suffer an adverse employment action. As described above, Seals has produced evidence that after her meeting with Torrez, her supervisors increased her workload and issued several disciplinary citations to her. While disciplinary citations do not usually constitute an adverse employment action under Title VII, Seals testified that such citations could have caused her to lose her license. As discussed above, such disparate treatment of an employee can constitute an adverse employment action under Title VII. As to the third element, a close temporal connection between a plaintiffs protected activity and the employer's adverse employment action can suffice to show the "causal connection" necessary to establish a prima facie case of retaliation. The Eighth Circuit recently explained: 924 Generally, "the threshold of proof necessary to establish a prima facie case is minimal." Young v. Warner-Jenkinson Co., 152 F.3d 1018, 1022 (8th Cir.1998). The timing of an adverse employment action in connection with the protected activity "can sometimes establish causation for purpose of establishing a prima facie case." Sherman v. Runyon, 235 F.3d 406, 410 (8th Cir.2000). We have held that periods much longer than . . . three weeks . . . can be used to infer causation. See Smith v. St. Louis Univ., 109 F.3d 1261, 1266 (8th Cir.1997) (inference of a causal connection was found when there was a six month gap between the adverse action and the protected activity); O'Bryan v. KTIV Television, 64 F.3d 1188, 1193 (8th Cir.1995). "An inference of a causal connection between a charge of discrimination and termination can be drawn from the timing of the two events, but in general more than a temporal connection is required to present a genuine factual issue on retaliation." Peterson v. Scott County, 406 F.3d 515, 524 (8th Cir.2005) (citing Smith v. Riceland Foods, Inc., 151 F.3d 813, 819-20 (8th Cir.1998)). In Peterson, a two-week gap between termination and protected activity was "close enough to establish causation in a prima facie case." Id. at 525. Green, 459 F.3d at 915. See also Buettner, 216 F.3d at 715-16 ("The requisite causal connection may be proved circumstantially by showing the discharge followed the protected activity so closely in time as to justify an inference of retaliatory motive."). The disciplinary citations that Seals received after her September meeting with Torrez were issued on November 19 and November 30, representing a time lapse of about two months. The date or dates on which Seals's supervisors allegedly increased her workload are not specified in the record, but Seals testified that this occurred after her meeting with Torrez. This temporal proximity, however, is not the only evidence of a causal link between Seals's September complaint of race discrimination and the allegedly unfair disciplinary actions and increase in duties. When Seals attempted to contact Torrez again on December 1 about her workload, Harris attempted to take the telephone book away from Seals and then told Seals to "get on back to work" when Seals reported that she felt ill and needed to see her physician. These actions, viewed in the context of the preceding events, lend support to Seals's claim that CMS sought to retaliate against her. See Wedow v. City of Kansas City, Mo., 442 F.3d 661, 675 (8th Cir.2006) (plaintiff may prove causation with circumstantial evidence that justifies an inference of a retaliatory motive, and such evidence must be evaluated along with temporal proximity). As noted above, CMS has presented legitimate, nondiscriminatory reasons for the disciplinary citationsSeals's errors in performing her job. CMS offers no explanation, however, for its alleged increase in Seals's workload and failure to discipline a white nurse who erred in the same manner as Seals. CMS has thus failed to rebut Seals's prima facie case of retaliation, and its motion for summary judgment as to this issue is denied. D. Intentional Infliction of Emotional Distress To establish a claim of intentional infliction of emotional distress, known in Arkansas as the tort of outrage, the plaintiff must prove that: (1) the defendant intended to inflict emotional distress or knew or should have known that emotional distress was the likely result of his conduct; (2) the conduct was extreme and outrageous and utterly intolerable in a 925 civilized community; (3) the defendant's conduct was the cause of the plaintiffs distress; and (4) the plaintiffs emotional distress was so severe that no reasonable person could be expected to endure it. Fuqua v. Flowers, 341 Ark. 901, 907, 20 S.W.3d 388, 391-92 (2000). The plaintiffs emotional distress must be not only severe, but must be reasonable and justified under the circumstances. M.B.M. Co., Inc. v. Counce, 268 Ark. 269, 280, 596 S.W.2d 681, 687 (1980). Extreme and outrageous conduct means "conduct that is so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society." Id. "Merely describing the conduct as outrageous does not make it so." Fuqua, 341 Ark. at 907, 20 S.W.3d at 392. "In other words, liability does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities." Ingram v. Pirelli Cable Corp., 295 Ark. 154, 158, 747 S.W.2d 103, 105 (1988). Arkansas courts have thus taken a strict view in recognizing outrage claims, especially in employment relationship situations. Smith v. Am. Greetings Corp., 304 Ark. 596, 601, 804 S.W.2d 683, 686 (1991). Smith involved a plaintiff who had a dispute with his supervisor at work. Id. at 599, 804 S.W.2d at 685. The plaintiff later tried to discuss the matter, and the supervisor allegedly hit him. Id. The plaintiff claimed that he was fired the next day because the defendant "found that he had provoked management personnel into a fight." Id. The Arkansas Supreme Court upheld the trial court's dismissal of the plaintiffs case for failure to state a claim, stating that "the employer's conduct did not come close to meeting" the standard for extreme and outrageous conduct required to support an outrage claim. Id. at 597, 601-02, 804 S.W.2d at 684, 686. In support of her outrage claim, Seals points to the same evidence that supports her claim of constructive discharge. Even assuming that Seals was constructively discharged, CMS's conduct does not rise to the level of extreme, outrageous, atrocious behavior that would give rise to a claim for the tort of outrage. While the manner in which an employee's discharge occurs may render the employer liable, Harris v. Ark. Book Co., 287 Ark. 353, 356, 700 S.W.2d 41, 43 (1985), even cases involving extended periods of demeaning treatment and a campaign orchestrated to result in an employee's termination have been held not to meet this standard, see Ingram, 295 Ark. 154, 747 S.W.2d 103; Sterling Drug, Inc. v. Oxford, 294 Ark. 239, 743 S.W.2d 380 (1988). Seals emphasizes the incident in which Harris tried to pull the telephone book away from her, repeatedly asserting that "she was threatened and physically assaulted by her supervisor." If hitting an employee is not extreme and outrageous behavior within the meaning of Arkansas tort law, however, pulling on a telephone book cannot be. Seals has neither alleged nor produced evidence that CMS engaged in the type of extreme and outrageous conduct that would support a claim for the tort of outrage. CMS's motion for summary judgment as to this claim is therefore granted. CONCLUSION Seals has produced evidence sufficient to raise a genuine issue of material fact as to whether she was subjected to race and age discrimination in the terms and conditions of her employment. CMS's motion for summary judgment as to Seals's claims for disparate treatment and constructive discharge under Title VII and the ADEA is denied. Seals has also produced evidence sufficient to raise a genuine issue of material 926 fact as to whether CMS retaliated against her for making a complaint of race discrimination. CMS's motion for summary judgment as to Seals's Title VII retaliation claim is denied. CMS, however, has established a prima facie case of entitlement to summary judgment as to Seals's claims for failure-to-promote under Title VII and intentional infliction of emotional distress under Arkansas law. CMS's motion for summary judgment is therefore granted as to these claims.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2336038/	72 F. Supp. 2d 1074 (1999) Michael J. FRY, Plaintiff, v. HOLMES FREIGHT LINES, INC., Defendant. No. 98-0217-CV-W-9. United States District Court, W.D. Missouri, Western Division. November 15, 1999. Michael W. Manners, Welch, Martin, Albano & Manners, P.C., Independence, MO, Lisa N. Gentleman, Welch, Martin, Albano & Manners, P.C., Independence, MO, for Michael J Fry, plaintiff. Robert W. McKinley, Lathrop & Gage L.C., Kansas City, MO, Tedrick A. Housh, 1075 III, Lathrop & Gage, P.C., Kansas City, MO, for Holmes Freight Lines, Inc, defendant. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT BARTLETT, Chief Judge. Plaintiff Michael J. Fry brings this sex discrimination suit against defendant Holmes Freight Lines, Inc., (Holmes) under Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. §§ 2000e, et seq., and the Missouri Human Rights Act (the MHRA), Mo.Rev.Stat. § 213, et seq. In Count I, plaintiff alleges that defendant violated Title VII and the MHRA when defendant's employees sexually harassed plaintiff and created a hostile work environment. In Count II, plaintiff alleges that defendant, by failing to respond to his complaints of harassment and by denying him a medical leave of absence, retaliated against plaintiff for complaining about the alleged harassment. In Count III, plaintiff alleges defendant intentionally caused him severe emotional distress in violation of Title VII and the MHRA. Defendant moves for summary judgment on all counts. I. SUMMARY JUDGMENT STANDARD Rule 56(c), Federal Rules of Civil Procedure, provides that summary judgment shall be rendered if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In ruling on a motion for summary judgment, it is the court's obligation to view the facts in the light most favorable to the adverse party and to allow the adverse party the benefit of all reasonable inferences to be drawn from the evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970); Reed v. ULS Corp., 178 F.3d 988, 990 (8th Cir.1999). If there is no genuine issue about any material fact, summary judgment is proper because it avoids needless and costly litigation and promotes judicial efficiency. Smith v. Marcantonio, 910 F.2d 500, 502-03 (8th Cir.1990); Roberts v. Browning, 610 F.2d 528, 531 (8th Cir.1979). The summary judgment procedure is not a "disfavored procedural shortcut." Rather, it is "an integral part of the Federal Rules as a whole." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2555, 91 L. Ed. 2d 265 (1986). Summary judgment is appropriate against a party who fails to make a showing sufficient to establish that there is a genuine issue for trial about an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 2553. The moving party bears the initial burden of demonstrating by reference to portions of pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, the absence of genuine issues of material fact. However, the moving party is not required to support its motion with affidavits or other similar materials negating the opponent's claim. Id. (emphasis added). The nonmoving party then must go beyond the pleadings and by affidavits, depositions, answers to interrogatories and admissions on file, designate specific facts showing that there is a genuine issue for trial. Id. A party opposing a properly supported motion for summary judgment cannot simply rest on allegations and denials in his pleading to get to a jury without any significant probative evidence tending to support the complaint. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The evidence favoring the nonmoving party must be more than "merely colorable." Id. at 2511. When 1076 the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986) (footnote omitted). The inquiry to be made mirrors the standard for a directed verdict: whether the evidence presented by the party with the onus of proof is sufficient that a jury could properly proceed to return a verdict for that party. Anderson, 106 S.Ct. at 2511. Essentially, the question in ruling on a motion for summary judgment and on a motion for directed verdict is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Id. at 2512. II. FACTS Based on the parties' pleadings, affidavits, deposition testimony, and admissions on file, the following facts are undisputed or, if disputed and plaintiff properly presented facts supporting his version of disputed facts, the disputed facts are presented in the light most favorable to plaintiff. Plaintiff Michael J. Fry is a white male. In 1986, defendant Holmes Freight Lines, Inc., (Holmes) hired Fry as a dockworker. On February 4, 1991, Holmes promoted Fry to full-time janitor. During his employment, Fry was a member of Local 41 and Local 552 of the Teamsters Union. In 1991 Holmes instituted a policy prohibiting sexual harassment. The policy provided in part that "[a] supervisor who is aware of sexual harassment and fails to take corrective action will be subject to discipline up to and including termination" and "[a]ll complaints of sexual harassment will be promptly investigated in as confidential manner as possible." While employed at Holmes, the following occurred: 1) Richard Saylor: Saylor, a dockworker and city driver at Holmes, a) wet his finger and stuck it in Fry's ear once or twice per week; b) kissed or touched the back of Fry's neck on a regular basis; c) threw Fry to the ground and, while laughing, attempted to grab his genitals, approximately once a month; d) grabbed Fry at the waist and hunched and pounded behind Fry's buttocks in simulation of sexual intercourse approximately eight times between 1992 and 1995; e) occasionally asked Fry: "Whose dick have you been sucking?"; f) regularly drove a loader through Fry's lines of sweeping compound on the dock; g) unplugged Fry's vacuum cleaner cord and tied it in knots approximately once a month; h) placed a lighter or match flame under Fry's pants approximately once a month; i) took Fry's lunch, but returned it a few minutes later, approximately once a month; j) placed a lighter to Fry's newspaper while Fry was reading it in the break room. 2) Harold "Leroy" Bishop: Bishop, a dockman/driver at Holmes, a) asked Fry, on a daily basis, such questions as "Do you want to suck my dick?"; "Do you want to take it in the butt?"; and "Whose dick have you been sucking?"; b) regularly pinched or patted Fry's buttocks; c) attempted to sit on Fry's lap approximately once per week from 1991 through 1992; d) told Fry approximately once a month: "You have a nice ass"; e) told union hall representatives on approximately five occasions that Fry would "suck your dick"; and f) asked Fry, approximately once per month from 1991 to 1992, "Have you been sniffing Lettie's pussy underneath her desk?", referring to receptionist Lettie Tkatch. 3) Joe Costanza: a) In 1994, Costanza, along with co-employees Rex Magee and Billy Hayes, pulled their pants 1077 down and chased Fry; b) Costanza referred to Fry as "Sally" and once told a union business agent, referring to Fry, that "This is Sally. He's everybody's bitch." 4) Jimmy Smith: Smith, on a weekly basis, gave Fry "wet willies" and commented "You like this, don't you?" Fry was the only employee at Holmes subjected to this specific conduct. Lettie Tkatch, a female receptionist at Holmes, occasionally received sexual comments from the dockmen/drivers. For instance, Leroy Bishop repeatedly said to her: "Let's go have sex." Tkatch did not take these comments seriously. Fry believes his co-workers may have treated him this way because they thought he was a homosexual. In fact, Fry is not a homosexual. Holmes' facility had a break room in which the dockmen/drivers congregated prior to leaving on their daily routes. The break room was accessible only from the dock area, and neither the dock nor the break room were visible from the front reception area, the general office, or the dispatch office. While most of the conduct directed at Fry occurred in the break room or on the docks, Leroy Bishop occasionally patted Fry's buttocks in the presence of Holmes manager, Ron Von Wolf. On approximately ten occasions, Fry asked Von Wolf to make Bishop stop. Von Wolf either ignored Fry or gave Fry a dirty look. Fry also complained to sales manager Lance Turner and dock supervisor Dave Roberts. Neither took any action in response to Fry's complaints. During Fry's employment, approximately 100 employees worked at Holmes' Kansas City terminal. With the exception of four females who worked in the office or receptionist areas, all Holmes' employees were male. Fry stopped coming to work the week of August 3, 1996. Fry did not submit a written request for medical leave or vacation, but Holmes permitted Fry to exhaust his sick time and vacation leave. Fry did not contact Holmes to explain his absence. Von Wolf then called Paul Meyer, Holmes' Safety Director in Omaha, Nebraska, who wrote Fry a certified letter on September 17, 1996, warning Fry that he had three days to return to work or he would be terminated. After Fry still failed to return, Von Wolf contacted Jeff Carroll of Local 552 to ask whether Carroll knew anything about Fry. On September 25, 1996, Meyer wrote a second certified letter informing Fry that he had been terminated for failing to report to work. On March 24, 1997, Fry filed a charge with the EEOC and the Missouri Commission on Human Rights alleging sex discrimination. The box marked "retaliation" was not checked, and neither the word "retaliation" nor any language to that effect appeared in Fry's charge. On October 8, 1997, the EEOC sent Fry a Dismissal and Notice of Rights, stating it was unable to conclude that he had established a statutory violation on the part of Holmes. On December 9, 1997, the Missouri Commission on Human Rights sent Fry's counsel a Notice of Right to Sue. According to the report of Dr. George Harris, Fry is marginally intelligent, was devastated at being taunted as a homosexual, and was physically intimidated by his co-workers. Dr. Harris found that, as a direct result of his co-workers' actions, Fry suffers from post-traumatic stress disorder, major depression, generalized anxiety disorder, and alcohol abuse. III. DISCUSSION A. Count I: Sexual Harassment Defendant moves for summary judgment on plaintiff's hostile work environment claim on the ground that plaintiff 1078 cannot demonstrate he was harassed because of his sex. Because the relevant provisions of the MHRA mirror Title VII and are construed in accordance with federal precedent, see Finley v. Empiregas, Inc., 975 F.2d 467, 473 (8th Cir.1992); Midstate Oil Co. v. Missouri Comm'n on Human Rights, 679 S.W.2d 842, 845-46 (Mo. banc 1984), I will analyze plaintiff's Title VII and MHRA claims together. Under Title VII, an employer may not "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin." 42 U.S.C. § 2000e-2(a)(1). This section prohibits an employer from maintaining a hostile work environment. See Harris v. Forklift Systems, Inc., 510 U.S. 17, 21, 114 S. Ct. 367, 370, 126 L. Ed. 2d 295 (1993). To prevail on a hostile work environment claim, Fry must demonstrate: 1) he is a member of a protected class; 2) he was subjected to unwelcome harassment; 3) the harassment was based on his sex; 4) the harassment affected a term, condition, or privilege of his employment; and 5) Holmes knew, or should have known, of the harassment but failed to take appropriate remedial action. See Carter v. Chrysler Corp., 173 F.3d 693, 700 (8th Cir.1999). Because defendant challenges only whether the alleged harassment was based on plaintiff's sex, I assume that, for the purposes of this motion, defendant concedes that plaintiff would present facts sufficient to create an issue for trial on the other factors. Same-sex harassment is actionable sex discrimination under Title VII. Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 118 S. Ct. 998, 1001-02, 140 L. Ed. 2d 201 (1998). The critical issue is whether the plaintiff is discriminated against because of his sex, such that "members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not." Id. at 1002 (quoting Harris, 114 S.Ct. at 372 (Ginsberg, J., concurring)). A same-sex plaintiff can establish that the defendant's conduct was based on sex through "credible evidence that the harasser is homosexual." Id. With "credible evidence" of the harasser's homosexual tendencies, the jury may infer the harasser's actions were motivated by homosexual desire, and, consequently, would not have been directed at someone of the opposite sex. Id. Defendant argues plaintiff has not presented credible evidence that its employees were motivated by homosexual desire. Defendant characterizes the conduct of its employees as "schoolyard taunts" and "juvenile provocation" unrelated to sexual interest, see Def's Mot.S.J., at 10, 17, and cites numerous cases for the proposition that Title VII does not prohibit all harassment laced with sexual content or innuendo in the workplace. See id., at 14-17; Def's Rep., at 19-22. Because a harasser's motive is normally proven through inferences rather than direct evidence, summary judgment is generally not appropriate. See Carter, 173 F.3d at 701; Davis v. Fleming Cos., 55 F.3d 1369, 1371 (8th Cir.1995). In this case, a jury might conclude that the motivation of defendant's employees was completely unrelated to sexual desire. However, "the court's role on summary judgment is not to find facts or to construe inferences in favor of a moving party." Carter, 173 F.3d at 701. If plaintiff presents facts which establish a material issue as to whether plaintiff was discriminated against because of his sex, the issue cannot be decided on summary judgment. Defendant asserts that its employees' actions alone cannot establish that plaintiff was discriminated against because of his sex. Rather, defendant argues that plaintiff's failure to inquire into the sexual history of his co-workers is fatal to his claim. Holmes misconstrues the level of factual support required for plaintiff to defeat summary judgment. Fry does not have to prove that his harassers are homosexual or 1079 investigate their sexual history to establish he was discriminated against because he is a man. See Johnson v. Hondo, Inc., 125 F.3d 408, 413 & nn. 5-6 (7th Cir.1997). If the conduct directed at Fry allows the inference that Fry was harassed because he is a man, then those acts constitute "credible evidence that the harasser is homosexual." Viewing the facts presented in the light most favorable to the plaintiff, there is a genuine issue for trial about whether the conduct of co-workers was visited upon plaintiff because he was a man. The persistent sexual propositions, epithets, and offensive touchings engaged in by Fry's co-workers suggest that one or all of them may be oriented toward members of the same sex. See, e.g., Shepherd v. Slater Steels Corp., 168 F.3d 998 (7th Cir.1999) (holding summary judgment improper where same-sex harasser complimented the plaintiff's physical appearance, requested oral and anal sex, touched himself in the plaintiff's presence, and exposed himself to the plaintiff); Bacon v. Art Institute of Chicago, 6 F. Supp. 2d 762 (N.D.Ill.1998) (denying summary judgment where same-sex harasser regularly brushed against the plaintiff so that their bodies would touch, ran his fingers through the plaintiff's hair, grabbed the plaintiff's buttocks, and grabbed the plaintiff's waist from behind and began thrusting his penis against the plaintiff's buttocks). Therefore, because plaintiff has proffered facts from which a reasonable jury could conclude that he experienced a hostile work environment because he is a man, summary judgment will be denied as to Count I. B. Count II: Retaliation Defendant moves for summary judgment on plaintiff's retaliation claim arguing that 1) plaintiff failed to exhaust his administrative remedies by failing to include his retaliation claim in his original EEOC charge; and 2) plaintiff cannot state a claim for retaliation because he cannot demonstrate adverse employment action or pretext. 1. Plaintiff failed to exhaust administrative remedies. Before filing a claim in federal court, a plaintiff must "1) timely file a charge of discrimination with the EEOC setting forth the facts and nature of the charge, and 2) receive notice of the right to sue." Williams v. Little Rock Mun. Water Works, 21 F.3d 218, 223 (8th Cir.1994) (citing 42 U.S.C. § 2000e-5(b), (c), (e)). A plaintiff exhausts administrative remedies for all allegations of discrimination "like or reasonably related to the substance of the charges" properly filed with the EEOC. Artis v. Francis Howell North Band Booster Ass'n, 161 F.3d 1178, 1183 (8th Cir.1998) (citing Wallin v. Minnesota Dep't of Corrections, 153 F.3d 681, 688 (8th Cir.1998)). The language of the EEOC complaint "must at least describe the facts and legal theory with sufficient clarity to notify the agency" and the defendant of the plaintiff's specific claim. Ong v. Cleland, 642 F.2d 316, 318 (9th Cir.1981) (quoting Cooper v. Bell, 628 F.2d 1208, 1211 (9th Cir.1980)); see Philipp v. ANR Freight System, Inc., 61 F.3d 669, 676 (8th Cir.1995). "[It] is well established that retaliation claims are not reasonably related to underlying discrimination claims." Wallin v. Minnesota Dep't of Corrections, 153 F.3d 681, 688 (8th Cir.1998) (citing Williams, 21 F.3d at 223) (emphasis added); see Williams, 21 F.3d at 222-23 (holding racial discrimination claim is not like or reasonably related to retaliation claim); O'Rourke v. Continental Cas. Co., 983 F.2d 94, 97 (7th Cir.1993) (holding age discrimination and retaliation claims are unrelated as a matter of law); Jensen v. Board of County Commissioners, 636 F. Supp. 293, 300 (D.Kan.1986) (holding retaliation claim is not like or reasonably related to sex discrimination charge); see also Tart v. Hill Behan Lumber Co., 31 F.3d 668, 673-74 (8th Cir.1994) (holding racial harassment 1080 claim is not like or reasonably related to claim of discriminatory discharge). Where the plaintiff asserts only discrimination even though the alleged retaliation occurred before the EEOC charge is filed, a subsequent retaliation claim is procedurally barred unless it "`grew out of the discrimination charge [plaintiff] filed with the EEOC.'" Wallin, 153 F.3d at 688 (quoting Wentz v. Maryland Cas. Co., 869 F.2d 1153, 1154 (8th Cir.1989)); see Seymore v. Shawver & Sons, Inc., 111 F.3d 794, 799 (10th Cir.), cert. denied, 522 U.S. 935, 118 S. Ct. 342, 139 L. Ed. 2d 266 (1997) (stating that where the alleged retaliation "occurs prior to the filing of a charge and the employee fails to allege the retaliatory act or a retaliation claim in the subsequent charge, the retaliatory act ordinarily will not reasonably relate to the charge"). It is undisputed that Fry did not check the "retaliation" box on his EEOC complaint. See Pl's Resp. Def's SUF, at 10 ¶ 40. Further, Fry did not use the word "retaliation" or any language to that effect in his charge. Id. The box labeled "sex" was marked, and the complaint focused on sexual harassment. See Def's Ex.J. Fry's retaliation claim did not grow out of his original EEOC charge, because the alleged retaliation occurred before the charge was filed. Even though Fry knew of the facts underlying his claim at the time he made his complaint, he did not allege retaliation. Therefore, based on Wallin, Fry's claim is procedurally barred. Nonetheless, plaintiff argues that the allegations of sexual harassment in his EEOC complaint are like or reasonably related to the allegations of retaliation. Specifically, Fry asserts his allegations that defendant ignored his harassment complaints and refused to grant him a medical leave of absence satisfy the exhaustion requirement. Fry provides no authority for the proposition that when an employer ignores a harassment complaint, it amounts to exhaustion of an administrative procedure provided by statute. In his EEOC complaint, Fry alleged he was harassed because of his sex, not because he complained about sexual harassment. See Def's Ex.J. Without an allegation in the EEOC charge of retaliatory harassment, as distinct from sexual harassment, there can be no exhaustion. Fry argues the allegation that he was denied a medical leave of absence is like or reasonably related to retaliation. See Def's Ex.J. However, Fry did not allege he was denied medical leave or discharged in retaliation for hostile work environment complaints. The allegations of Fry's charge related to sex discrimination and sexual harassment, not retaliation. Based on Fry's EEOC complaint, one could conclude that he believed he was treated wrongfully because of sex discrimination. Retaliation is not mentioned or clearly implied. Fry did not present his retaliation theory or the facts supporting it to the EEOC for its consideration. Allowing Fry to bring this claim "would circumscribe the EEOC's investigatory and conciliatory role, as well as deprive the charged party of notice of the charge....'" Williams, 21 F.3d at 223 (quoting Babrocky v. Jewel Food Co. & Retail Meatcutters, 773 F.2d 857, 863 (7th Cir.1985)). Therefore, Fry's retaliation claim is procedurally barred. Because plaintiff failed to exhaust his administrative remedies, summary judgment will be granted as to Count II of plaintiff's complaint. C. Count III: Intentional Infliction of Emotional Distress Defendant moves for summary judgment on plaintiff's intentional infliction of emotional distress claim arguing that 1) plaintiff's claim is barred by the exclusivity provision of Missouri Workers' Compensation Law, Mo.Rev.Stat. § 287.120.2, and 2) defendant's conduct was not sufficiently outrageous to support plaintiff's claim. In its opposition to defendant's motion for summary judgment, plaintiff concedes that his emotional distress claim is barred. *1081 Therefore, summary judgment is granted as to Count III. IV. CONCLUSION Accordingly, it is ORDERED that: 1) defendant Holmes Freight Lines, Inc.'s Motion for Summary Judgment (Doc. 65) is denied as to Count I; and 2) defendant Holmes Freight Lines, Inc.'s Motion for Summary Judgment (Doc. 65) is granted as to Count II and Count III.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2397341/	566 F. Supp. 1057 (1983) Martin E. RUBIN, Plaintiff, v. DECISION CONCEPTS INC., Ernest W. Rodrigues, John J. Villafranco and Fanny Farrel, Defendants. No. 81 Civ. 2959 (CMM). United States District Court, S.D. New York. May 19, 1983. Seymour Schorr, New York City, for plaintiff. Ernest Holzberg, New York City, for defendants. METZNER, District Judge. In this action the plaintiff, a former employee of defendant Decision Concepts Inc., brings suit under Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), to recover benefits allegedly due under a defined contribution pension plan. Defendants contend that the plan was subsequently effectively amended to a profit sharing plan which is the document that should govern whether any recovery is due plaintiff. The individual defendants are the trustees of the plan. 1058 The issue as to which plan governs the relationship of the parties is to be tried to the court without a jury, Pollock v. Castrovinci, 476 F. Supp. 606, aff'd without opinion, 622 F.2d 575 (2d Cir.1980), as I ruled on the opening of the trial. Plaintiff was employed by Decision Concepts Inc. from September 4, 1973, until he left in July or August 1980. On April 1, 1975, the employer created a defined contribution pension plan for its employees, including plaintiff. This plan required the employee to contribute a certain percentage of his yearly earnings to the fund. There is some dispute as to what constitutes the basis upon which the percentage was to be calculated, but that question need not be resolved at this time. ERISA provides that material modifications or changes in a plan must be disclosed to participants and filed with the Secretary of Labor. 29 U.S.C. §§ 1021, 1022, 1024. Section 1022 requires the plan administrator to furnish the participant with an understandable summary of the change within 210 days after the end of the plan year in which the change is adopted. § 1024(b)(1)(B). At the same time this "summary plan description" must be filed with the Secretary of Labor. § 1024(a)(1)(C). Plaintiff claims that the summary plan description filed with the Secretary, of which he received a copy, was deficient in that it failed to state that it was a modification or change of an existing plan. He says that a fair reading of the document leads one to the conclusion that it was an additional plan available to the employees, and that the original plan continued in effect. The record shows that on January 4, 1979, the Department of Labor received a summary plan description consisting of eleven pages, the first page of which was headed "Table of Contents," followed by ten pages of explanatory material for the employee. This material relates to a profit sharing plan. However, there is no mention in these papers that this profit sharing plan changed or took the place of the plan under which the plaintiff had been making contributions. Defendant says that it also sent to the Department of Labor with the summary plan description a form of the Equitable Life Assurance Society of the United States referable to the "Noncontributory PROFIT SHARING Plan" which states that it is an amendment and restatement of its existing pension plan and trust with the defendant Decision Concepts Inc. No witness was produced to prove the mailing of this document. Aside from counsel, none of the named defendants appeared on behalf of defendants to contest this lawsuit. This seems quite unusual since the defendants expected a jury trial on all the issues in the case. However, if this document was sent, obviously it would have accompanied the summary. Since the Department of Labor records do not indicate that it was ever received, I find that it was not sent to the Department. According to the records of the Internal Revenue Service, a "favorable determination" on the employer's application for approval of the profit sharing plan was issued on April 10, 1979. Form 5616 sent by the Internal Revenue Service to the employer in conjunction with this favorable determination has a box which reads, "Date Adopted or Amended," but the words "or Amended" have been stricken. The date "06 27 78" is written in the box. On this record the plaintiff claims that he never was given notice that the plan under which he had been covered was modified, changed or superseded. The employer claims that even though the summary received by the plaintiff may not have indicated that it was an amendment or superseding plan, plaintiff received notice that such was the fact by virtue of a memorandum dated June 27, 1978. Plaintiff denies receiving this memorandum, but I find that it was received by him. This memorandum does not comport with the statutory requirement as to the substance of the notice that should be given to an employee. A layman could not be expected 1059 to know the effect the change would have on him. However, this notice, plus the summary of the plan which the plaintiff admits having received, certainly would give him the information which the law requires. From April 1978 to over two years later when the plaintiff left his employment, deductions for his pension were not being made by the employer. It is inconceivable that an employee, over such a long period of time, would not have made complaint about the failure to take payroll deductions which he was relying on for his pension contributions. In addition, with only ten employees involved, there must have been some discussion of this change. I find that under the circumstances, the failure of the employer to have complied fully with the filing requirements with the Secretary of Labor does not give rise to a cause of action in favor of the plaintiff. Plaintiff has failed to cite any authority to the contrary. With the issue resolved that the profit sharing plan governs the transaction in question, there remains the issue as to the amount of damages, if any, owed the plaintiff. The case of Pollock v. Castrovinci, referred to above, would indicate that this issue should be tried to a jury. However, after the Court of Appeals affirmed Pollock without opinion, three Circuit Courts of Appeal reviewed the question in depth and reached the conclusion that a jury trial on this issue is not warranted. In re Vorpahl, 695 F.2d 318 (8th Cir.1982); Calamia v. Spivey, 632 F.2d 1235 (5th Cir.1980); Wardle v. Central States, Southeast and Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir.1980), cert. denied, 449 U.S. 1112, 101 S. Ct. 922, 66 L. Ed. 2d 841 (1981); see also Note, The Right to Jury Trial in Enforcement Actions Under Section 502(a)(1)(B) of ERISA, 96 Harv.L.Rev. 737 (1983). I am confident that if the matter were to be reviewed again by the Second Circuit Court of Appeals it would hold that there is no right to a jury trial in this case. The trial of the issue will proceed before this court in Courtroom 2804 on Wednesday, May 25, 1983, at 2 P.M. So ordered.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/4555642/	Nebraska Supreme Court Online Library www.nebraska.gov/apps-courts-epub/ 08/14/2020 08:08 AM CDT -1- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 E.M., appellant, v. Nebraska Department of Health and Human Services et al., appellees. Kevin Vasquez Perez, appellant, v. Nebraska Department of Health and Human Services et al., appellees. Walter Hernandez Marroquin, appellant, v. Nebraska Department of Health and Human Services et al., appellees. ___ N.W.2d ___ Filed June 5, 2020. Nos. S-18-1146 through S-18-1148. 1. Administrative Law: Judgments: Appeal and Error. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record. 2. ____: ____: ____. When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by com- petent evidence, and is neither arbitrary, capricious, nor unreasonable. 3. Administrative Law: Judgments. Whether an agency decision con- forms to the law is by definition a question of law. 4. Administrative Law: Statutes: Appeal and Error. The meaning and interpretation of statutes and regulations are questions of law for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. 5. Administrative Law: Appeal and Error. An issue that has not been presented in the petition for judicial review has not been properly pre- served for consideration by the district court. 6. Appeal and Error. An appellate court will not consider an issue on appeal that was not passed upon by the trial court. -2- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 7. Statutes: Legislature: Presumptions: Judicial Construction. In deter- mining the meaning of a statute, the applicable rule is that when the Legislature enacts a law affecting an area which is already the subject of other statutes, it is presumed that it did so with full knowledge of the preexisting legislation and the decisions of the Nebraska Supreme Court construing and applying that legislation. 8. Statutes. Statutory language is to be given its plain and ordinary meaning. 9. Public Assistance: Words and Phrases. For the purposes of state or local public benefits eligibility under Neb. Rev. Stat. § 4-108 (Reissue 2012), “lawfully present” means the alien classifications under 8 U.S.C. § 1621(a)(1), (2), and (3) (2012). 10. Public Assistance: Legislature. In order to affirmatively provide a state public benefit to aliens not lawfully present in the United States, as authorized by 8 U.S.C. § 1621(d) (2012), the Legislature must make a positive or express statement extending eligibility by reference to immi- gration status. 11. Constitutional Law: Federal Acts: States. Under the Supremacy Clause of the U.S. Constitution, state law that conflicts with federal law is invalid. 12. Statutes: Words and Phrases. It is not for the courts to supply missing words or sentences to a statute to supply that which is not there. 13. Statutes: Appeal and Error. The rules of statutory interpretation require an appellate court to give effect to the entire language of a statute, and to reconcile different provisions of the statutes so they are consistent, harmonious, and sensible. 14. ____: ____. An appellate court gives effect to all parts of a statute and avoids rejecting as superfluous or meaningless any word, clause, or sentence. 15. Administrative Law: Statutes. For purposes of construction, a rule or regulation of an administrative agency is generally treated like a statute. 16. ____: ____. Properly adopted and filed regulations have the effect of statutory law. 17. Constitutional Law. Nebraska’s separation of powers clause prohibits the three governmental branches from exercising the duties and preroga- tives of another branch. 18. ___. The separation of powers clause prevents a branch from delegat- ing its own duties or prerogatives except as the constitution directs or permits. Appeals from the District Court for Lancaster County: Kevin R. McManaman, Judge. Affirmed. -3- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 Allison Derr, Robert McEwen, and Sarah Helvey, of Nebraska Appleseed Center for Law in the Public Interest, and Mindy Rush-Chipman for appellants. Douglas J. Peterson, Attorney General, and Ryan C. Gilbride for appellees. Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ. Cassel, J. I. INTRODUCTION A federal statute 1 and its Nebraska counterpart 2 make non- citizens, who are not “lawfully present,” 3 ineligible for state public benefits unless the State “affirmatively provides” 4 for eligibility. In these consolidated Administrative Procedure Act 5 appeals, we determine whether the language of the Young Adult Bridge to Independence Act (YABI) 6 sufficiently made several noncitizen applicants eligible for all public benefits of the Bridge to Independence program (B2I). A state agency ruled them ineligible, and on appeal, the district court affirmed. On appeal to this court, we affirm. We also reject their consti- tutional challenge to an agency regulation. 7 II. BACKGROUND Before we summarize the proceedings, a brief introduction to YABI and B2I will be helpful. 1 See 8 U.S.C. § 1621 (2012). 2 See Neb. Rev. Stat. §§ 4-108 to 4-113 (Reissue 2012 & Cum. Supp. 2018). 3 See §§ 1621(d) and 4-108. 4 § 1621(d). See § 4-108. 5 See Neb. Rev. Stat. §§ 84-901 to 84-920 and 84-933 to 84-948 (Reissue 2014 & Cum. Supp. 2018). 6 See Neb. Rev. Stat. §§ 43-4501 to 43-4514 (Reissue 2016, Cum. Supp. 2018 & Supp. 2019). 7 See 395 Neb. Admin. Code, ch. 10, § 003.02 (2014). -4- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 1. YABI and B2I YABI was enacted in 2013 8 in response to the federal Fostering Connections to Success and Increasing Adoptions Act of 2008. 9 The purpose of YABI is to “support former state wards in transitioning to adulthood, becoming self-sufficient, and creating permanent relationships.” 10 YABI, in turn, created B2I, Nebraska’s extended foster care program. 11 The program is available to a young adult who is at least 19 years old, who was adjudicated to be a juvenile under Neb. Rev. Stat. § 43-247(3)(a) (Reissue 2016), who satisfies the education/ work requirement, who is a Nebraska resident, and who does not meet the level of care for a nursing facility. 12 B2I offers support services such as medical care, foster care maintenance payments, and case management services until the former ward turns 21 years old. 13 We now turn to the procedural history in these consolidated appeals. 2. Agency Proceedings E.M., Kevin Vasquez Perez, and Walter Hernandez Marroquin (applicants) are Guatemalan citizens, who fled to Nebraska as minors. Each was adjudicated by the juvenile court, pursuant to § 43-247(3)(a), and each was placed in foster care. Before each applicant turned 19 years of age, he applied to the Nebraska Department of Health and Human Services (DHHS) for B2I. At the time of each application, the applicant had already received special immigrant juvenile (SIJ) status from the U.S. Citizenship and Immigration Services. DHHS denied each of the applications, because each applicant failed to meet the “citizenship/lawful presence requirements.” 8 2013 Neb. Laws, L.B. 216 (formerly known as Young Adult Voluntary Services and Support Act). 9 Pub. L. No. 110-351, § 1, 122 Stat. 3949. 10 See § 43-4502. 11 See § 43-4501 et seq. 12 See § 43-4504. 13 See § 43-4505. -5- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 Applicants requested fair hearings with DHHS. At the hear- ing, the parties presented evidence and made arguments. In DHHS’ order, it reasoned that because a person not “lawfully present” in the United States shall not be provided public ben- efits and applicants were neither U.S. citizens nor qualified aliens, they were not eligible for B2I. 3. District Court Appeal Applicants filed timely petitions for review to the district court for Lancaster County. The parties stipulated to joinder of applicants’ petitions for review. Applicants made two argu- ments. First, they asserted that the omission of a citizenship requirement and the inclusion of a case management service that offers immigration assistance showed a clear intent to extend public benefits to those not “lawfully present.” Second, because DHHS promulgated a regulation that they claimed added an eligibility requirement not provided in YABI, they asserted that it violated the separation of powers clause of the Nebraska Constitution. 14 The district court began its analysis by discussing the rel- evant federal statutes. The court observed that under § 1621, aliens are not eligible for state or local public benefits unless they qualify under an enumerated alien status. 15 But, the court recognized, under § 1621(d), the State can provide benefits to those not otherwise eligible through the enactment of a state law that “affirmatively provides for such eligibility.” The court reasoned that because there was no affirmative language in YABI to include those not “lawfully present” to receive public benefits, applicants were not eligible for B2I. It explained that applicants’ argument‑that the inclusion of an immigration assistance service in the program provided eligibility to those with SIJ status‑“require[d] an inference not warranted by the statutory language or scheme.” It stated that providing the immigration assistance service to those 14 See Neb. Const. art. II, § 1. 15 See 8 U.S.C. § 1641 (2012). -6- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 ineligible for the program does not automatically convert an individual into someone who is eligible. It remarked that the generic language of the statute did not rise to the level of affirmative language by the Legislature to provide eligibility for those individuals. The court analyzed applicants’ argument regarding the addi- tional eligibility regulation. It stated: In other words, that regulation explains that if a person does not meet the citizenship/lawful presence require- ment, the Department may nevertheless assist the young adult in obtaining the necessary state court findings for status adjustment application (after which that the young adult may achieve an appropriate status under § 1621(a) to receive public benefits). It concluded that the regulation did not change the language or meaning of the program. It affirmed DHHS’ denial of appli- cants’ participation in B2I. Each of the applicants filed a timely appeal, which, pursu- ant to the parties’ stipulation, the Nebraska Court of Appeals consolidated for briefing and disposition. Later, we granted applicants’ petition to bypass the Court of Appeals. 16 III. ASSIGNMENTS OF ERROR Applicants assign, restated, that the district court erred in (1) determining that citizenship or immigration status is rel- evant to eligibility for B2I; (2) affirming DHHS’ determination that because each applicant was not a citizen or qualified alien, he was not eligible; and (3) failing to strike down the eligibil- ity regulation on the basis that it violated the separation of powers clause of the Nebraska Constitution. IV. STANDARD OF REVIEW [1-3] A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate 16 See Neb. Ct. R. App. P. § 2-102(B) (rev. 2015). -7- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 court for errors appearing on the record. 17 When reviewing an order of a district court under the Administrative Procedure Act for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evi- dence, and is neither arbitrary, capricious, nor unreasonable. 18 Whether an agency decision conforms to the law is by defini- tion a question of law. 19 [4] The meaning and interpretation of statutes and regula- tions are questions of law for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below. 20 V. ANALYSIS The federal Immigration and Nationality Act (INA) 21 defines many terms, including “alien” 22 and “national of the United States.” 23 Federal statutes also use lengthy terms, such as “an alien who is not lawfully present,” 24 to describe the status of particular individuals. Following the lead of the California Supreme Court and purely for the sake of brevity, we refer to such individuals as “unlawful aliens.” 25 The overarching question that we must answer is whether applicants were eligible for B2I. 17 McManus Enters. v. Nebraska Liquor Control Comm., 303 Neb. 56, 926 N.W.2d 660 (2019). 18 Id. 19 Id. 20 In re Application No. OP-0003, 303 Neb. 872, 923 N.W.2d 653 (2019). 21 See 8 U.S.C. § 1101 et seq. (2012). 22 See § 1101(a)(3) (“term ‘alien’ means any person not a citizen or national of the United States”). 23 See § 1101(a)(22) (“term ‘national of the United States’ means (A) a citizen of the United States, or (B) a person who, though not a citizen of the United States, owes permanent allegiance to the United States”). 24 See 8 U.S.C. §§ 1621(d) and 1623 (2012). 25 See Martinez v. Regents of University of Cal., 50 Cal. 4th 1277, 241 P.3d 855, 117 Cal. Rptr. 3d 359 (2010). -8- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 1. Arguments Not Considered On appeal to this court, applicants make several argu- ments—two of which DHHS challenges as being outside the scope of applicants’ petitions for review filed in the district court. DHHS first challenges the argument that because § 1621 does not apply to unlawful aliens in foster care services under the juvenile court jurisdiction, it does not apply to unlaw- ful aliens in extended foster care. DHHS also challenges the argument that B2I is an in-kind service, necessary for life and safety, which, applicants argue, is an exempt public benefit. [5] As DHHS correctly notes, an Administrative Procedure Act statute dictates that a petition for review must set forth the “petitioner’s reasons for believing that relief should be granted.” 26 Thus, we have said that an issue that has not been presented in the petition for judicial review has not been prop- erly preserved for consideration by the district court. 27 We agree that neither argument was raised in the amended petitions for review filed in the district court. Each broadly stated that “[DHHS has] incorrectly and unlawfully deter- mined that [applicants are] not eligible for extended foster care benefits . . . .” We agree with DHHS that this broad assertion did not properly preserve the challenged arguments for review. [6] This, in turn, dictates that we should not consider either argument. An appellate court will not consider an issue on appeal that was not passed upon by the trial court. 28 Therefore, we will not address them. 2. Federal and State Statutory Limitations Before we can determine if applicants are eligible for B2I, we must determine whether the federal and state statutory 26 § 84-917(2)(b)(vi). 27 Skaggs v. Nebraska State Patrol, 282 Neb. 154, 804 N.W.2d 611 (2011). 28 Thorson v. Nebraska Dept. of Health & Human Servs., 274 Neb. 322, 740 N.W.2d 27 (2007). -9- Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 limitations on providing state public benefits to noncitizens apply to YABI. And before undertaking that analysis, we first recall the relevant federal and state statutes. (a) PRWORA In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). 29 PRWORA prohibited an alien who is not a “qualified alien (as defined in [8 U.S.C. § 1641])” from receiving any “Federal public benefit.” 30 It did so “[n]otwithstanding any other provi- sion of law” 31 but with certain exceptions. 32 Pertinent to the appeal before us, PRWORA also declared certain individuals to be ineligible for any state or local pub- lic benefit. 33 It provided that an alien who is not (1) a quali- fied alien (as defined by § 1641), (2) a nonimmigrant under the INA, or (3) an alien paroled into the United States under the INA for less than 1 year, is not eligible for any state or local public benefit. 34 Like the prohibition on federal pub- lic benefits, the prohibition on state public benefits applies “[n]otwithstanding any other provision of law” 35 but with specified exceptions. 36 Applicants concede that they are “not considered qualified aliens for the purposes of PRWORA.” 37 They also concede that they are “not specifically listed under PRWORA as qualified to receive those benefits meeting the definition of state or local public benefits.” 38 29 Pub. L. No. 104-193, § 1, 110 Stat. 2105. 30 See 8 U.S.C. § 1611(a) (2012). 31 Id. 32 See § 1611(b). 33 See § 1621(a). 34 Id. 35 Id. 36 See § 1621(b) and (d). 37 Brief for appellants at 16. 38 Id. at 16-17. - 10 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 At the heart of the case before us is PRWORA’s provi- sion creating an exception allowing states to extend state and local public benefits to unlawful aliens. We quote it in full, as follows: A State may provide that an alien who is not law- fully present in the United States is eligible for any State or local public benefit for which such alien would otherwise be ineligible under subsection (a) of this sec- tion only through the enactment of a State law after August 22, 1996, which affirmatively provides for such eligibility. 39 In this exception, the key terms are “alien who is not lawfully present in the United States” and “affirmatively provides.” 40 (b) L.B. 403 In 2009, the Nebraska Legislature enacted the state law equivalent of PRWORA as part of L.B. 403. 41 It provided that “[n]otwithstanding any other provisions of law, . . . no state agency or political subdivision of the State of Nebraska shall provide public benefits to a person not lawfully present in the United States.” 42 In order to verify lawful presence, an applicant for public benefits must attest that he or she is a U.S. citizen or that he or she is a qualified alien and law- fully present. 43 (c) Interpreting YABI [7] We must interpret YABI consistently with PRWORA and its Nebraska counterpart. In determining the meaning of a statute, the applicable rule is that when the Legislature enacts a law affecting an area which is already the subject of other statutes, it is presumed that it did so with full knowledge of 39 § 1621(d). 40 See id. 41 2009 Neb. Laws, L.B. 403, §§ 1 to 6 (codified at §§ 4-108 to 4-113). 42 § 4-108(1). 43 § 4-111(1). - 11 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 the preexisting legislation and the decisions of the Nebraska Supreme Court construing and applying that legislation. 44 The Legislature enacted YABI in 2016, 7 years after it adopted L.B. 403 and 20 years after Congress enacted PRWORA. No subsequent legislation has been enacted to limit or broaden PRWORA or its Nebraska counterpart. Applicants concede, as they must, that YABI “should be read in conjunction with the PRWORA and L.B. 403.” 45 [8] We do so using our well-settled principle: Statutory language is to be given its plain and ordinary meaning. 46 Both §§ 1621 and 4-108 proclaim that they apply “[n]otwithstanding any other provision[] of law.” When the Legislature enacted YABI, it did so with full knowledge that §§ 1621 and 4-108 limited public benefits to citizens and “lawfully present” aliens and required it to “affirmatively provide[]” for eligibility in order to extend public benefits to unlawful aliens. We will examine each of these requirements in more detail. (d) “Lawfully Present” Because YABI is subject to §§ 1621 and 4-108, we must determine if applicants were “lawfully present.” They were not. The Nebraska act does not define “lawfully present.” But one section requires an applicant to verify lawful presence by attesting that he or she is either (1) a U.S. citizen or (2) a quali- fied alien and is lawfully present. 47 This requirement makes it clear that “lawfully present” refers to an individual’s citizen- ship or alien immigration status. Because the federal govern- ment has broad, undoubted power over immigration and the status of aliens, 48 we turn to PRWORA for guidance. 44 McEwen v. Nebraska State College Sys., 303 Neb. 552, 931 N.W.2d 120 (2019). 45 Brief for appellants at 18. 46 In re Interest of Jeremy U. et al., 304 Neb. 734, 936 N.W.2d 733 (2020). 47 See § 4-111(1). 48 See Arizona v. United States, 567 U.S. 387, 132 S. Ct. 2492, 183 L. Ed. 2d 351 (2012). - 12 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 Although the term is not defined in PRWORA, it appears only in § 1621, which we have already analyzed, and in § 1623. Similar to § 1621, § 1623 states that “an alien who is not lawfully present in the United States shall not be eligible on the basis of residence within a State . . . for any postsecond- ary education benefit . . . .” In Arizona ex rel. Brnovich v. Maricopa CCCDB, 49 the Arizona Supreme Court interpreted § 1623’s “lawfully pres- ent” requirement as the eligibility required for § 1621(a). It reasoned that from the context of § 1621(a) and § 1621(d) that “Congress directly equated aliens ‘not lawfully present’ with those otherwise ‘ineligible under subsection (a).’” 50 It explained that Congress provided for only certain categories of aliens to be eligible for state and local public benefits. Therefore, aliens who do not fall within one of those catego- ries are not “lawfully present” for the purpose of State or local public benefits. [9] We agree with the reasoning of the Arizona Supreme Court. The context of § 1621 shows clear intent by Congress to equate those ineligible under § 1621(a) with aliens not “lawfully present.” With certain exceptions not applicable here, only the three alien statuses enumerated in § 1621(a) may receive public benefits. For the purposes of state or local public benefits eligibility under § 4-108, “lawfully pres- ent” means the alien classifications under § 1621(a)(1), (2), and (3). Applicants have not presented evidence that they qualify as “lawfully present” aliens under § 1621(a). Applicants are not qualified aliens under § 1641, nonimmigrants under the INA, or aliens who were paroled into the United States under the INA for less than 1 year. Thus, for purposes of § 4-108, appli- cants were “not lawfully present in the United States.” 49 See Arizona ex rel. Brnovich v. Maricopa CCCDB, 243 Ariz. 539, 416 P.3d 803 (2018). 50 Id. at 541, 416 P.3d at 805. - 13 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 (e) “Affirmatively Provides” Where an alien is not “lawfully present,” state public ben- efits can be provided only through the enactment of a state law which “affirmatively provides” for eligibility. 51 Because we have not determined what those words require, we first exam- ine decisions from other states and then settle the meaning of the phrase. (i) Decisions From Other States In Kaider v. Hamos, 52 an Illinois court determined the plain meaning of the phrase by using a dictionary definition. There, both parties did likewise. One side contended that “affirm atively” required specific or express reference to unlawful aliens; the other urged that it only required an unambiguous and positive expression of legislative intent to opt out of § 1621(a). The Illinois court reasoned that the first argument went too far, in that Congress did not require express or spe- cific reference to a specific term. The “better understanding,” the court said, was that “Congress wanted to prevent the passive or inadvertent override of [§] 1621(a).” 53 The court determined that “[§] 1621(d) is satisfied by any state law that conveys a positive expression of legislative intent to opt out of [§] 1621(a) by extending state or local benefits to unlawful aliens.” 54 Then, applying this understanding to the Illinois pro- grams’ statutory language, which provided services to “‘non- citizens’” or “‘noncitizens’ who were not otherwise eligible,” the court reasoned that the term “noncitizen” left unmodified was broad enough to encompass unlawful aliens. 55 It concluded that the programs positively conveyed an intent to opt out of § 1621(a) and extend certain benefits to unlawful aliens. 51 § 1621(d). 52 Kaider v. Hamos, 2012 IL App. (1st) 111109, 975 N.E.2d 667, 363 Ill. Dec. 641 (2012). 53 Id. at ¶ 14, 975 N.E.2d at 673, 363 Ill. Dec. at 647. 54 Id. at ¶ 17, 975 N.E.2d at 674, 363 Ill. Dec. at 648. 55 Id. at ¶ 23, 975 N.E.2d at 676, 363 Ill. Dec. at 650. - 14 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 In Martinez v. Regents of University of Cal., 56 the California Supreme Court analyzed whether the California Legislature affirmatively provided for unlawful aliens to be exempt from paying nonresident tuition at California state colleges and uni- versities. There, the California statute “expressly refer[red] to ‘the case of a person without lawful immigration status.’” 57 After the court determined that the statute did not violate § 1623, it turned to § 1621. It rejected a lower court’s reason- ing that to “affirmatively provide[]” required the state law to specify that “illegal aliens” were eligible and to expressly reference § 1621. 58 The court then concluded that “‘in order to comply, the state statute must expressly state that it applies to undocumented aliens, rather than conferring a benefit generally without specifying that its beneficiaries may include undocu- mented aliens.’” 59 Thus, the statute was sufficient to “affirma- tively provide[]” for unlawful aliens. (ii) Statutory Interpretation We agree with the analysis of the California and Illinois courts. Both courts rejected the notion that to “affirmatively provide[]” means to include one universal alien status or to expressly reference § 1621. We further agree that in order to “affirmatively provide[],” there must be more than confer- ring a general benefit that would passively include unlaw- ful aliens. [10] The plain language of § 1621(d) required the Legislature to “affirmatively provide[] for such eligibility.” The federal statute does not require the Legislature to “affirmatively pro- vide[]” for specific services or services that only unlawful aliens can use. It requires the Legislature to state who is eli- gible. In order to affirmatively provide a state public benefit 56 See Martinez, supra note 25. 57 Id. at 1295, 241 P.3d at 866, 117 Cal. Rptr. 3d at 373. 58 See id. 59 Id. at 1296, 241 P.3d at 868, 117 Cal. Rptr. 3d at 374. - 15 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 to aliens not lawfully present in the United States, as autho- rized by § 1621(d), the Legislature must make a positive or express statement extending eligibility by reference to immi- gration status. 3. Application to YABI Having settled the meaning of § 1621(d) and its Nebraska equivalent, we turn first to applicants’ two arguments regarding the “affirmatively provides” requirement. Then, we address the meaning of § 43-4505(3)(h). Applicants argue that for two reasons, YABI “affirmatively provides” for unlawful aliens. Neither is persuasive. First, they contend that the omission of a lawful pres- ence requirement evidenced the Legislature’s intent to include unlawful aliens. They cite our familiar proposition that the intent of the Legislature is expressed by omission as well as by inclusion. 60 And, they argue, the Legislature did not “include any deference to the limitations within PRWORA or L.B. 403 within its eligibility requirements.” 61 [11] But as we have already explained, PRWORA and L.B. 403 apply to YABI. Section 1621(d) dictates that to provide eligibility for a state public benefit to an unlawful alien, the state must “affirmatively provide[]” for such eligibility. Section 1621(a) denies eligibility “[n]otwithstanding any other provi- sion of law,” subject to the exception of § 1621(d). Here, the proposition on which applicants rely conflicts with the federal statute. Under the Supremacy Clause of the U.S. Constitution, state law that conflicts with federal law is invalid. 62 The fed- eral statute requires a positive or express statement to include unlawful aliens for eligibility. An omission cannot qualify as a positive or express statement. 60 See Christine W. v. Trevor W., 303 Neb. 245, 928 N.W.2d 398 (2019). 61 Brief for appellants at 23. 62 Speece v. Allied Professionals Ins. Co., 289 Neb. 75, 853 N.W.2d 169 (2014). - 16 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 Second, applicants argue that the inclusion of a case man- agement service that assists participants in “[o]btain[ing] the necessary state court findings and then apply[ing] for [SIJ] status . . . or apply[ing] for other immigration relief that the young adult may be eligible for,” 63 evidenced legisla- tive intent to provide for unlawful aliens. They contend that because aliens with and without SIJ status would not qualify as “lawfully present,” that it “‘expressly’ and ‘unambiguously’ confers a benefit to [unlawful] aliens within the meaning of PRWORA.” 64 We disagree. [12] This provision describes a service, not an eligible recipient. It is not for the courts to supply missing words or sentences to a statute to supply that which is not there. 65 There is no positive or express statement using words which describe individuals. We cannot supply what the Legislature omitted. In Kaider, the statute provided for “‘noncitizens,’” 66 and in Martinez, the statute provided for “‘a person without lawful immigration status.’” 67 Nothing like that appears in § 43-4505(3)(h) or anywhere else in YABI. Moreover, the Legislature has demonstrated that it knows how to affirmatively provide for unlawful aliens to receive public benefits. In § 4-111(3), the Legislature affirmatively pro- vided for a classification of persons, too lengthy to quote here, to grant eligibility for a professional or commercial license. That statute provides an express statement of who is eligible to receive the benefit. And in that instance, the Legislature recited that it enacted subsection (3) “pursuant to the authority provided in [§] 1621(d).” 68 Section 4-111(c) certainly qualified 63 § 43-4505(3)(h). 64 Reply brief for appellants at 11. 65 State v. Jedlicka, ante p. 52, 938 N.W.2d 854 (2020). 66 Kaider, supra note 52, 2012 IL App. (1st) 111109 at ¶ 23, 975 N.E.2d at 676, 363 Ill. Dec. at 650. 67 Martinez, supra note 25, 50 Cal. 4th at 1296, 241 P.3d at 866, 117 Cal. Rptr. at 373. 68 See § 4-111(3)(e). - 17 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 as an affirmative provision. Section 43-4505(3)(h) simply does not do so. As part of this argument, applicants also contend that if unlawful aliens are not eligible for B2I, then § 43-4505(3)(h) would be “useless and unnecessary.” 69 We disagree. [13,14] Of course, we recognize that some effect must be given to § 43-4505(3)(h). The rules of statutory interpretation require an appellate court to give effect to the entire language of a statute, and to reconcile different provisions of the statutes so they are consistent, harmonious, and sensible. 70 An appellate court gives effect to all parts of a statute and avoids rejecting as superfluous or meaningless any word, clause, or sentence. 71 But we can do so without judicially rewriting the statute to include a blanket eligibility provision that is simply not there. [15,16] In order to reconcile § 43-4505(3)(h), it must be read in light of relevant state and federal statutes and regula- tions. Section 1621 required an affirmative provision to make unlawful aliens eligible for YABI, but the Legislature did not. Treating unlawful aliens as eligible for all of YABI would conflict with federal law. But failing to treat § 43-4505(3)(h) as an exception to YABI would also conflict with federal law. The INA defines the term “special immigrant.” 72 A federal regulation allows for an alien to be eligible for SIJ status until he or she is 21 years old. 73 Section 43-4514(3) (Cum. Supp. 2014) granted DHHS authority to adopt and promulgate rules and regulations as needed to carry out YABI. For purposes of construction, a rule or regulation of an administrative agency is generally treated like a statute. 74 Properly adopted and filed 69 Reply brief for appellants at 15. 70 Hoppens v. Nebraska Dept. of Motor Vehicles, 288 Neb. 857, 852 N.W.2d 331 (2014). 71 Id. 72 See 8 U.S.C. § 1101(27)(J). 73 See 8 C.F.R. § 204.11 (2020). 74 McManus Enters., supra note 17. - 18 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 regulations have the effect of statutory law. 75 One of DHHS’ regulations strives to carry out the Legislature’s intent by assisting an otherwise ineligible young adult in “obtaining the necessary state court findings and then applying for [SIJ] status or applying for other immigration relief that the young adult may be eligible for.” 76 Because the federal regulation provides for SIJ eligibility until the alien is 21 years old, the most sensible reading of § 43-4505(3)(h) creates an exception where DHHS may offer immigration assistance to unlawful aliens until they are 21 years old. That reading was adopted by DHHS and promul- gated in its regulations. By carving out this limited exception for unlawful aliens to receive immigration assistance, it most effectively gives effect to every clause of the statute and does so without creating a conflict with federal law. 4. Challenge to Regulation Applicants argue that DHHS violated Neb. Const. art. II, § 1, by “improperly adding a B2I eligibility requirement.” 77 Specifically, they attack § 003.02, which states that “[i]n order to participate in [B2I], a young adult must be a citizen of the United States or an alien lawfully present in the United States . . . .” [17,18] We agree that Nebraska’s separation of powers clause prohibits the three governmental branches from exer- cising the duties and prerogatives of another branch. 78 The separation of powers clause prevents a branch from delegating its own duties or prerogatives except as the constitution directs or permits. 79 But we have already recognized that applicants’ interpreta- tion of YABI would conflict with federal law, in violation of 75 Id. 76 395 Neb. Admin. Code, ch. 10, § 003.02A (2014). 77 Brief for appellants at 26. 78 In re Interest of A.M., 281 Neb. 482, 797 N.W.2d 233 (2011). 79 Id. - 19 - Nebraska Supreme Court Advance Sheets 306 Nebraska Reports E.M. v. NEBRASKA DEPT. OF HEALTH & HUMAN SERVS. Cite as 306 Neb. 1 the Supremacy Clause of the U.S. Constitution. As we have determined, in order to be eligible for B2I, an individual must be a citizen or “lawfully present.” Section 003.02 is simply the codification of the PRWORA limitation of federal law that we have discussed. Under the unique circumstances of the case before us, DHHS did not violate the separation of powers clause when promulgating § 003.02. VI. CONCLUSION We conclude that the district court did not err in determin- ing that applicants were not eligible for B2I. Because appli- cants were not “lawfully present” and the Legislature did not “affirmatively provide[]” for unlawful aliens to be eligible under YABI, applicants were ineligible for B2I. We affirm the judgment of the district court. Affirmed.	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/2293365/	168 F.Supp.2d 375 (2001) TECHNOLOGY BASED SOLUTIONS, INC. and James Roberts, Plaintiffs, v. The ELECTRONICS COLLEGE INC. and A. Norton McKnight, Defendants. No. CIV.A. 99-CV-4833. United States District Court, E.D. Pennsylvania. April 3, 2001. 376 377 Craig S. Hilliard, Allen M. Silk, Stark & Stark, Princeton, NJ, for Plaintiffs. Charles A. Wilkinson, Bethlehem, PA, for Defendants. MEMORANDUM GREEN, Senior District Judge. Presently before the court are Plaintiffs' Motion for Summary Judgment as to Defendants' Counterclaim, Defendants' Motion for Leave to Amend the Pleadings and the parties' responses thereto. For the reasons stated below, Plaintiffs' motion will be granted in part and denied in part and Defendants' motion will be granted. I. FACTUAL HISTORY Plaintiffs, Technology Based Solutions, Inc. ("TBS") and its President and owner, James Roberts ("Roberts"), seek a declaratory judgment that neither TBS nor Roberts infringed any copyrights or other rights held by Defendants, Electronic College, Inc. ("ECI") and its President, A. Norton McKnight ("McKnight"). In or around 1975, Edu-Systems, Inc. ("ESI"), a company owned by Roberts, contracted with the Department of Education of the State of Maryland to produce a set of materials to test students on their awareness of employer's expectations in relation to a defined set of attitudes. (See Roberts Aff. ¶ 2.) ESI produced and submitted the materials to the Department of Education. (See Roberts Aff. ¶ 4.) ESI then formatted the materials, which allegedly became a copyrighted product of ESI. (See Roberts Aff. ¶ 5.) 378 On January 1, 1992, Education Technologies, Inc. ("ETI"), another company owned by Roberts, contracted with ECI to develop a new product called PAVE (the "Joint Development Contract"). (See Pls.' Mem. Supp. Summ. J., Ex. M.) The materials originally produced by Roberts in 1975 were also used to develop PAVE. (See Roberts Aff. ¶ 6.) In 1993, Centec Learning Center ("Centec") purchased ETI and allegedly assumed its rights and obligations under the Joint Development Contract. (See Roberts Aff. ¶ 7.) In addition, Roberts became Vice-President of Centec. (See Roberts Aff. ¶ 7.) In February 1995, ECI filed an arbitration claim against Centec for alleged breach of the Joint Development Contract. An arbitration award was issued in favor of ECI on December 15, 1995. (See Pls.' Mem. Supp. Summ. J., Ex.s D, N.) Centec then entered into a settlement agreement with both ECI and McKnight dated January 11, 1996 ("Settlement Agreement"). (See Pls.' Mem. Supp. Summ. J., Ex. N.) Roberts subsequently left Centec and created a new company, TBS (as stated earlier, both Roberts and TBS are Plaintiffs herein). Using the original scripts developed in 1975, Roberts created a product called "Employability Attitudes." In July 1999, ECI, through its attorney, informed TBS that it was prepared to take legal action against TBS for copyright infringement and breach of the Settlement Agreement. (See Pls.' Mem. Supp. Summ. J., Ex. D.) In the alternative, ECI was willing to accept a settlement of $500,000.00 in damages. (See id.) TBS denied all allegations and demanded ECI provide facts to support its claims. (See Pls.' Mem. Supp. Summ. J., Ex. E.) ECI allegedly failed to respond to TBS' request. (See Pls.' Mem. Supp. Summ. J., Ex. F.) On or about September 28, 1999, Plaintiffs commenced this action seeking a declaratory judgment of non-infringement of Defendants' copyrights pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. Jurisdiction is premised on diversity of citizenship.[1] Defendants filed an Answer and Counterclaim. Plaintiffs now move for summary judgment against Defendants' Counterclaim. Defendants filed a response and also seek to amend its Counterclaim. II. DISCUSSION Summary judgment shall be awarded "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A dispute regarding a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Once the moving party has carried the initial burden of showing that no genuine issue of material fact exists, the non-moving party cannot rely on conclusory allegations in its pleadings or in memoranda and briefs to establish a genuine issue of material fact. See Pastore v. Bell Telephone Co. of Pa., 24 F.3d 508, 511 (3d Cir.1994). The nonmoving party, instead, must establish the existence of every element essential to his case, based on the affidavits or by the depositions and admissions on file. See id. (citing Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir. 379 1992)); see also Fed.R.Civ.P. 56(e). The evidence presented must be viewed in the light most favorable to the non-moving party. See Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir.1983). In the present matter, Plaintiffs move for summary judgment against Defendants' Counterclaim on three grounds. Plaintiffs argue that Defendants' Counterclaim should be dismissed in its entirety, because the allegations are preempted by the Copyright Act and barred by Pennsylvania's two-year statute of limitations. In addition, Plaintiffs argue that Defendants' allegations that Plaintiffs breached the Settlement Agreement are without merit, because there is no privity of contract between Plaintiffs and Defendants. Defendants' Counterclaim alleges that Plaintiffs breached the Settlement Agreement by improperly retaining and copying Defendants' PAVE product. Defendants also allege that Plaintiffs' conduct resulted in unfair competition and unjust enrichment. 1. Preemption Federal district courts have exclusive original jurisdiction over civil cases which arise under congressional acts relating to copyrights. See 28 U.S.C. § 1338(a). Under the Copyright Act, state law claims which fall within the subject matter of copyrights are preempted. See 17 U.S.C. 301(a).[2] However, state law claims that are completely preempted by § 301(a) of the Copyright Act may be converted into federal claims. See, e.g., Rosciszewski v. Arete Associates, 1 F.3d 225, 232 (4th Cir.1993). Conversion is supported by the rationale that "Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) (discussing complete preemption in the ERISA context). The practice of converting preempted state law claims into federal claims has occurred in removal actions. See Rosciszewski, 1 F.3d at 233; Metropolitan Life Ins. Co., 481 U.S. at 66, 107 S.Ct. 1542. In the present matter, both parties concede that Defendants' Counterclaim is preempted by the Copyright Act, but disagree whether preemption entitles Plaintiffs to summary judgment or merely a conversion of Defendants' claims into copyright infringement claims. Plaintiffs contend that the allegations asserted in the Counterclaim fall within the subject matter of copyright and should be dismissed. Defendants argue against dismissal on the ground that the allegations asserted in the Counterclaim are automatically converted into copyright infringement claims. Although Defendants acknowledge that complete conversion has been permitted only in removal actions, they find no reason why the principle should not extend to non-removal actions. This court is not aware of any federal court decision holding that, absent claims involving removal, a party's preempted state law claim or counterclaim may not be converted into a copyright infringement claim. Accordingly, I find no 380 legitimate reason why the conversion principle should not apply to non-removal cases, including the present matter. Conversion is predicated on the theory of complete preemption, which provides that an area of state law may be so completely preempted by Congress that any claim based on the preempted state law is considered a federal claim. In this matter, both parties acknowledge that Defendants' Counterclaim falls within the subject matter of copyrights and is therefore completely preempted by the Copyright Act.[3] The grant of exclusive jurisdiction to federal district courts over civil actions arising under the Copyright Act, coupled with the complete preemption of Defendants' Counterclaim by the Copyright Act, compels the conclusion that Defendants' Counterclaim as it relates to the allegations of misappropriation, unfair competition and unjust enrichment arises under federal law and this court has jurisdiction over those claims.[4] Thus, Plaintiffs' Motion for Summary Judgment will be denied on this ground, and Defendants' Counterclaim will be converted into claims under the Copyright Act. 2. Statute of Limitations The statute of limitations for copyright infringement civil claims is three years. See 17 U.S.C. § 507(b).[5] By contrast, the applicable statute of limitations for "[a]n action for taking, detaining or injuring personal property ....", as pled by Defendants, is two years from accrual under Pennsylvania law. See 42 Pa.C.S.A. § 5524. Both statutes accrue when the party has knowledge of the violation or is chargeable with such knowledge. See Stone v. Williams, 970 F.2d 1043, 1048 (2d Cir.1992), cert. denied, 508 U.S. 906, 113 S.Ct. 2331, 124 L.Ed.2d 243 (1993); Haggart v. Cho, 703 A.2d 522, 526 (Pa.Super.1997). Plaintiffs move to dismiss Defendants' Counterclaim as being barred by Pennsylvania's two-year statute of limitations. Specifically, Plaintiffs contend that Defendants knew that a wrongful act occurred no later than July 10, 1997, when 381 McKnight stated that he believed that Plaintiffs had unlawfully taken and copied portions of the PAVE product. (McKnight's Dep. at 162:10-165:16.) Using July 10, 1997 as the accrual date, Plaintiffs argue that Defendants filed the Counterclaim two years and ten months after the accrual date on May 23, 2000. Defendants respond that the Counterclaim is not time-barred, because the appropriate length of time to file a copyright infringement claim is three years. In addition, Defendants contend that the Counterclaim survives the two-year statute of limitations, because Defendants did not discover that Plaintiffs were infringing on their copyright until June 1999, when Defendants analyzed a demo of Plaintiffs' "Employability Attitude" program and found similarities to Defendants' PAVE program. In light of the previous discussion, the appropriate statute of limitations for Defendants' Counterclaim as converted is three years. Therefore, Defendants' Counterclaim is not time-barred. Furthermore, Defendants' Counterclaim would survive Pennsylvania's two-year statute of limitations, because on summary judgment, viewing the evidence in a light most favorable to Defendants, a reasonable jury could find that Defendants did not become aware of the alleged injury until June, 1999. Therefore, Defendants' Counterclaim is not time-barred and Plaintiffs' Motion for Summary Judgment will be denied on this ground. 3. Privity of Contract To prove a breach of contract under Pennsylvania law, a plaintiff must show (1) the existence of a valid and binding contract to which the plaintiff and defendant were parties; (2) the essential terms of the contract; (3) that plaintiff complied with the contract's terms; (4) that the defendant breached a duty imposed by the contract; and (5) that damages resulted from the breach. See Gundlach v. Reinstein, 924 F.Supp. 684, 688 (E.D.Pa.1996). In the present matter, Plaintiffs seek to dismiss Defendants' Counterclaim to the extent that Defendants allege that Plaintiffs breached the Settlement Agreement. Plaintiffs allege that they could not have breached the Settlement Agreement because they were not parties to the Settlement Agreement. Defendants respond that Roberts, by nature of his position as Vice-President of Centec, had knowledge of the Settlement Agreement. In addition, Defendants argue that Roberts signed an affidavit that was not factual when he stated that all Defendants' PAVE materials were returned to Defendants or destroyed. The Settlement Agreement shows signatures for James A. Milam, Chief Executive Officer for Centec Learning Corporation and Norton McKnight, Chief Executive Officer for the Electronic College, Inc. (See Pls.' Mem. Supp. Summ. J., Ex. N.) In addition, the parties named in the agreement are "Centec Learning Corporation, Norton McKnight, individually, and The Electronic College, Inc." (Id.) Plaintiffs are not mentioned as parties to the Settlement Agreement. (See id.) Contrary to Defendants' contention, Roberts' alleged knowledge of the agreement does not in and of itself create privity of contract between Plaintiffs and Defendants. Furthermore, Roberts' signature on an affidavit stating that Defendants' PAVE materials were returned to Defendants or destroyed does not establish privity of contract either. The aforementioned affidavit was not presented to the court. Defendants, as the non-movant, cannot rely on conclusory allegations in their pleadings or in their memoranda and briefs to establish 382 a genuine issue of material fact. See Pastore, 24 F.3d at 511. To survive a motion for summary judgment, Defendants must establish the elements of their claim. See id. Because Defendants failed to produce evidence showing privity of contract between the Plaintiffs and Defendants, Plaintiffs' Motion for Summary Judgment on allegations that Plaintiffs breached the Settlement Agreement will be granted. 4. Amending the Pleadings Under Fed.R.Civ.P. 15(a), if a responsive pleading is already served, a party may only amend his pleading "by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Furthermore, "[w]hen a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." Fed.R.Civ.P. 13(f). Motions to amend under Fed.R.Civ.P. 15(a) may be filed to cure a defective pleading, to correct insufficiently stated claims, to amplify a previously alleged claim, to change the nature or theory of the case, to state additional claims, to increase the amount of damages sought, to elect different remedies, or to add, substitute or drop parties to the action. See L. CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2d §§ 1474 (1990). Leave to amend may be properly denied, however, where there exists "undue delay, bad faith or dilatory motive on part of the movant, ... undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc...." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Defendants move for leave to amend the pleadings to file an appropriate copyright infringement claim on the ground that they reserved the right to file a claim for copyright infringement if discovery indicated that such a claim was proper. (See Answer ¶ 18.) On the last day of discovery, Defendants contend that Plaintiffs produced a disk of Plaintiffs' commercial program which contains substantial portions identical to Defendants' PAVE product. (See TBS/EA Transcript attached to Def.s' Resp.) Defendants also move to amend the pleadings to file a trade secret violation claim, because Plaintiffs provided materials to Defendants during discovery that contained Defendants' trade secrets. (See McKnight Aff. at 2.) Plaintiffs oppose Defendants' motion due to unduly delay, futility, and prejudice to Plaintiffs. To the extent that Defendants' allegations are converted into claims under the Copyright Act, Defendants will be permitted to amend the pleadings to correct insufficiently stated claims and/or amplify previously alleged claims. Defendants will also be permitted to add a trade secret violation claim in light of evidence Defendants obtained during discovery. Contrary to Plaintiffs' contention, Defendants' motion is not unduly delayed. Plaintiffs were on notice that Defendants would file a claim for copyright infringement if such a claim became evident through discovery. (See Answer ¶ 18.) Furthermore, Defendants' motion is in direct response to Plaintiffs' Motion for Summary Judgment which was filed in violation of the Pre-Trial Order.[6] Plaintiffs are also not unduly 383 prejudiced by an Amended Counterclaim, because Plaintiffs acknowledge that Defendants' state law claims are equivalent to copyright infringement claims. Nevertheless, from the date of filing of Defendants' Amended Counterclaim, Plaintiffs will have twenty (20) days to plead thereto and discovery will be reopened for forty (40) days, if so needed. Finally, Defendants' proposed claims are not futile, because, as discussed earlier, Defendants offered evidence that the PAVE product is registered. (See Defs.' Surreply, Exs.) Accordingly, Defendants' Motion for Leave to Amend the Pleadings will be granted. III. CONCLUSION For the foregoing reasons, Plaintiffs' Motion for Summary Judgment will be granted with respect to Defendants' allegations that Plaintiffs violated the Settlement Agreement and denied with respect to dismissing Defendants' Counterclaim in its entirety. In addition, Defendants' Motion for Leave to Amend the Pleadings will be granted. NOTES [1] Plaintiff TBS is an alleged New Jersey corporation and Plaintiff Roberts is an alleged Pennsylvania citizen. (See Compl. ¶¶ 2-3.) Defendant ECI is an alleged Delaware corporation and Defendant McKnight is an alleged citizen of Florida. (See Compl. ¶¶ 4-5.) [2] The Copyright Act states in relevant part: On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State. 17 U.S.C. § 301. [3] The manner in which Defendants' claims are preempted warrants further discussion. Both parties concede that the allegations of unjust enrichment and unfair competition are preempted by the Copyright Act. See Curtin v. Star Editorial Inc., 2 F.Supp.2d, 670, 675 (E.D.Pa.1998); Kregos v. Associated Press, 3 F.3d 656, 666 (2d Cir.1993) (citing cases). The allegation that Plaintiffs breached the Settlement Agreement is also preempted to the extent that it is litigated as a misappropriation of Defendants' work. See Kregos, 3 F.3d at 666. However, if the allegation that Plaintiffs breached the Settlement Agreement is characterized as a breach of contract claim, it is not preempted by the Copyright Act. See Pytka v. Van Alen, No. 92-1610, 1992 WL 129632, *4 (E.D.Pa., June 8, 1992) (citation omitted). Generally, if a cause of action contains an "extra element" that qualitatively distinguishes it and its underlying rights from those addressed by the Copyright Act, the cause of action is not preempted. See, e.g., Rosciszewski, 1 F.3d at 229-30. In the present matter, the allegations of misappropriation, unfair competition and unjust enrichment are functionally equivalent to a copyright infringement claim and are therefore preempted. However, the breach of contract claim, if one exists, appears qualitatively different. [4] Plaintiffs further contend that this court lacks subject matter jurisdiction over Defendants' Counterclaim as a copyright infringement claim, because Defendants failed to register a copyright of the PAVE program. Defendants, however, presented evidence to show that the PAVE product was registered with the Copyright Office. (See Defs.' Surreply, Exs.) Thus, viewing the evidence in a light most favorable to Defendants, Plaintiffs' argument fail. [5] "No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued." 17 U.S.C. § 507(b). [6] Pursuant to the Pre-Trial Order, discovery was scheduled to be completed by October 13, 2000 and all dispositive motions were to be filed within fifteen (15) days of the close of discovery. (See Order, July 10, 2000.) Plaintiffs filed their Motion for Summary Judgment seventeen (17) days after the close of discovery on October 30, 2000. (See Docket No. 8.) Therefore, Plaintiffs' contention that Defendants' motion should be denied for undue delay and undue prejudice is undermined by Plaintiffs' own conduct.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1735654/	33 F. Supp. 867 (1940) HUGHES v. PRESIDENT AND DIRECTORS OF GEORGETOWN COLLEGE. No. 88895. District Court of the United States for the District of Columbia. June 4, 1940. 868 Emmett L. Sheehan and Maurice H. Lanman, Jr., both of Washington, D. C., for plaintiff. Henry I. Quinn, of Washington, D. C., for defendant. PROCTOR, Justice. The plaintiff, Susan M. Hughes, was seriously and permanently injured in Georgetown University Hospital while about her duties as a nurse specially employed by a paying patient. A jury by special verdict found the injury to have resulted from negligence of a student nurse in the regular employ of the hospital. The defendant corporation is an eleemosynary institution. The hospital is one of the charitable activities conducted by it. An insurance policy protects defendant from any loss legally imposed in a tort action to the extent of $25,000, besides the costs of defense. Several defenses are urged against a judgment upon the verdict. The basic contention is made that defendant as a charitable institution is altogether immune from liability for torts of its employees in the course of their work, and alternatively that the plaintiff was a beneficiary of the charity and as such excluded from recovery against the institution. The argument for total immunity hinges upon the early English rule, based upon the so-called "trust fund theory" that recognition of liability would operate to wrongfully divert trust funds donated for charity. Duncan v. Findlater, 6 Cow. & F. 894, Feoffees of Heriot's Hospital v. Ross, 12 Cow. & F. 507, Holliday v. Vestry of St. Leonard, 11 C.B., N.S., 192. The doctrine found some support in this country led by the Supreme Court of Massachusetts in McDonald v. Massachusetts General Hospital, 120 Mass. 432, 21 Am.Rep. 529. It has met with favor by this court. Mattson v. Columbia Hospital, Law 65825, Bauer v. Childrens' Hospital, Law 73184, Sundheimer v. Georgetown College, Law 83333. However, there is no controlling decision in this jurisdiction. The theory upon which the rule is grounded requires its universal application. It admits of no exception. Recipients of the charity and strangers thereto must be treated alike. All are barred. Hamburger v. Cornell University, 240 N.Y. 328, 338, 148 N.E. 539, 42 A.L.R. 955; Andrews v. Y. M. C. A., Iowa, 284 N.W. 186, 189. The doctrine met with opposition in England and was finally repudiated by the House of Lords in the related cases of Mersey Docks, etc., and Gibbs v. Pierce, 11 H of L. Cases 686. It has often been severly criticised and rejected in this country. Andrews v. Y. M. C. A., supra, 284 N.W. 189 and cases cited. Our courts have turned to other and varying theories which, in their final analysis, appear to rest upon the dictates of public policy. Ettlinger v. Trustees of Randolph Macon College, 4 Cir., 31 F.2d 869, 870. A review of American cases shows a steady tendency to draw away from the concept of total immunity by distinguishing between beneficiaries and strangers to the charity. Thus, today we find the great weight of authority exempting charitable institutions from liability to recipients of the benefits extended by a charitable institution. Judge Parker says in the case just cited, "It is significant that almost without exception the courts, while giving different reasons for the rule, have not hesitated to apply it where the one seeking to enforce liability against a charitable institution is one who has accepted benefits from it." 31 F.2d at page 872. See also Andrews v. Y. M. C. A., supra, 284 N.W. at page 192, 10 Amer. Jur. p. 692. Strong considerations of natural justice dictate that one who receives and succors the sick and injured ought not be mulcted in damages by the recipient of his kindness for some careless act of a servant. Upon this concept has grown the idea of differentiating between beneficiaries and non-beneficiaries, so that today the 869 great weight of authority favors immunity only as against beneficiaries of a charity. Thus a principle has been established which I am convinced is sound and just. I do not think immunity should go further. I agree with the second circuit court of appeals that "whatever may be the correct doctrine where the injured plaintiff is a recipient of the bounty of an eleomosynary institution, * * * we have no difficulty in deciding that irresponsibility should not be extended to the tortious infliction of damage upon strangers." Henry W. Putnam Memorial Hospital v. Allen, 2 Cir., 34 F.2d 927, 929. The present case then is reduced to the question was plaintiff a stranger to the charity? For the defendant it is argued that the patient employing plaintiff was a beneficiary, hence she, the nurse, partook of the same status. There are cases, however, which hold the hospital liable to a paying patient. It is also argued that by allowing plaintiff to come upon and use the premises to carry on her vocation as a nurse she was given a distinct advantage by the hospital, which independently of her relationship to the patient put her in the category of a beneficiary. Assuming, though not deciding, that the patient was a beneficiary it does not follow that a like relationship attaches to the nurse. The hospital was established and maintained to provide "care and medical attention for suffering humanity". It was not established or conducted to afford a place of employment for trained nurses. They were not the objects of its beneficent efforts. The patients were. Extension of the facilities of the institution to nurses, called in to attend particular patients who could afford the expense, was but a reasonable, if not necessary incident in so conducting the institution as to best carry out the charitable intent. It was a method commonly adopted to make a hospital of greatest service to suffering human beings who have been taken in for care and treatment. Like regular employees, the presence of trained nurses specially employed by individual patients is essential to a hospital in seeking to fulfil its merciful aims. The cases strongly support the view that employees of a hospital are not beneficiaries but strangers to the charity. 10 Amer.Jur. 703. By what logic then can special nurses be put in the opposite class? I think a contrary view results from failure to keep clearly in mind the particular charitable purpose of the institution and the persons who fall directly within the particular class for whom the benefactions are intended. They only should be treated as beneficiaries. Others are strangers to the charity, even though incidental circumstances may bring them into some relationship or contact with its activities. Thus in Sisters of Charity, etc., v. Duvelius, 123 Ohio St. 52, 173 N.E. 737, a special nurse was held to be a stranger to the charity. Likewise in Marble v. Nicholas Senn Hosp., etc., 102 Neb. 343, 167 N.W. 208, as to a doctor attending a patient; Cohen v. General Hosp., etc., 113 Conn. 188, 154 A. 435, as to visiting husband; McLeod v. St. Thomas Hosp., 170 Tenn. 423, 95 S.W.2d 917, as to visiting wife; Hosp., etc., v. Thompson, 116 Va. 101, 81 S.E. 13, 51 L.R.A.,N.S., 1025, as to a friend accompanying patient to hospital. See also the very recent case of Andrews v. Y. M. C. A., Iowa, 284 N.W. 203, as to a carpenter employed by the W. P. A. temporarily working in a building of the charitable institution. This opinion elaborately discusses the whole subject of the liability of charitable institutions for negligence of employees. In preparing this memorandum no attempt has been made to list all cases bearing upon the points involved, for they are very numerous. Many are reviewed in the Andrews case. It is further contended that the proof failed to show negligence on the part of defendant's employee and did show negligence by the plaintiff which either was the sole cause of the accident or a contributing factor, hence that a verdict should have been directed for defendant. These questions were carefully considered before submitting them to the jury upon the special interrogatories. I still think the evidence raised substantial issues of fact upon these matters; therefore that they were properly left to the jury. The question arising out of the fact that defendant is protected by liability insurance involves consideration of vital contract rights and fundamental principles of law and justice. In view of conclusions reached in plaintiff's favor it becomes unnecessary to deal with that question now. Judgment will be entered for plaintiff for the amount of damages found by the jury, with usual costs. So ordered.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2538614/	719 F. Supp. 2d 7 (2010) Wayne EPPS, Plaintiff, v. UNITED STATES CAPITOL POLICE BOARD et al., Defendants. Civil Action No. 09-1001 (RMU). United States District Court, District of Columbia. June 28, 2010. 9 Wayne W. Epps, Mitchellville, MD, pro se. Rhonda C. Fields, United States Attorney's Office, Washington, DC, for Defendants. MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART THE DEFENDANTS' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION; DISMISSING THE PLAINTIFF'S COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED RICARDO M. URBINA, District Judge. I. INTRODUCTION This matter is before the court on the defendants' motion to dismiss for lack of 10 subject matter jurisdiction and failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), or, in the alternative, for summary judgment pursuant to Rule 56. The plaintiff, a former member of the Library of Congress Police Force ("the Library Police"), has asserted age discrimination claims against the United States Capitol Police Board ("the Capitol Police Board") and the United States Library of Congress ("the Library of Congress"). The plaintiff's complaint arises from the merger of the Library Police into the Capitol Police, as mandated by the U.S. Capitol Police and Library of Congress Police Merger Implementation Act of 2007 ("the Merger Act"), 121 Stat. 2546 (2008). The Merger Act subjected Library Police officers to a mandatory retirement age for the first time and prohibited some older Library Police officers, including the plaintiff, from becoming Capitol Police officers, providing instead for their transfer to the Capitol Police as civilian employees. The plaintiff alleges that this provision of the Merger Act violated the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 623 et seq. Because the plaintiff did not participate in mediation prior to commencing suit and because mediation is a jurisdictional prerequisite to commencing suit against the Capitol Police Board in federal court, the court grants the defendants' motion to dismiss the plaintiff's claims against the Capitol Police Board for lack of subject matter jurisdiction. Additionally, because the ADEA prohibits neither maximum entry ages nor mandatory retirement ages for federal law enforcement positions, the court dismisses the plaintiff's claims against the Library of Congress sua sponte for failure to state a claim for which relief can be granted. II. FACTUAL & PROCEDURAL BACKGROUND In January 2008, Congress enacted the Merger Act, which effected the merger of the Library Police into the Capitol Police. See generally 121 Stat. 2546. The Merger Act transferred all Library Police employees to the Capitol Police as either officers or civilian employees. Id. § 2(a)(1). The Act provided that only those Library Police officers who could complete twenty years of federal law enforcement service prior to their sixtieth birthday would become Capitol Police officers.[1]Id. § 2(b)(1)(A)(i). Those Library Police officers who were ineligible to become Capitol Police officers under this requirement transferred to the Capital Police Board as civilian employees. Id. § 2(b)(1)(B). Under the Merger Act, no transferred Library Police officer, whether he became an officer or a civilian, would suffer a reduction in pay or rank. Id. § 2(d)(1). The plaintiff alleges that the Library Police hired him to serve as an officer in July 2002 when he was forty-eight years old. Compl. ¶¶ 5, 8. The plaintiff asserts that throughout his employment, he fully performed his job duties as required by the Library Police. Id. ¶ 6. Nevertheless, the plaintiff claims he was "forced to resign" in July 2008 at the age of fifty-four when he learned that he would not be allowed to continue to serve as an officer upon transfer to the Capitol Police and 11 would instead become a civilian employee.[2]Id. ¶ 7, 9. The plaintiff alleges that in addition to preventing him from serving as an officer with the Capitol Police, the defendants deprived him of advanced training and prevented him from advancing in rank or salary. Id. ¶ 9. In January 2009, the plaintiff filed an administrative charge of age discrimination with the Congressional Accountability Office of Compliance ("the CAO"). Id. ¶ 13 & Ex. 1. In May 2009, following the expiration of the mandatory counseling period with the CAO, id. Ex. 1, the plaintiff commenced this action, see generally id. Notably, he did so without first submitting to mediation at the administrative level. See Office of Compliance, Certificate of Official R. ¶ 5. In September 2009, the defendants filed this motion to dismiss or, in the alternative, for summary judgment. See generally Defs.' Mot. In their motion, the defendants argue, inter alia, that this court lacks subject matter jurisdiction over the plaintiff's claims because the plaintiff failed to exhaust his administrative remedies before filing suit. See Defs.' Mot. at 10, 12-14. In November 2009, the plaintiff filed an opposition in which he argued, inter alia, that the court should excuse his failure to exhaust his administrative remedies on equitable grounds. See Pl.'s Opp'n at 18-23. With the defendants' motion ripe for adjudication, the court turns to the applicable legal standards and the parties' arguments.[3] III. ANALYSIS A. Legal Standard for a Motion to Dismiss for Lack of Subject Matter Jurisdiction Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S. Ct. 1673, 128 L. Ed. 2d 391 (1994); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that "[a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction"). Because "subject-matter jurisdiction is an `Art[icle] III as well as a statutory requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir. 2003) (quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S. Ct. 2099, 72 L. Ed. 2d 492 (1982)). On a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing by a preponderance of the evidence that the court has subject matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992). Because subject matter jurisdiction focuses on the court's power to hear the claim, however, the court must give the plaintiff's factual allegations closer scrutiny 12 when resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C.Cir.2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C.2001). Thus, the court is not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S. Ct. 2246, 96 L. Ed. 2d 51 (1987). Instead, "where necessary, the court may consider the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.Cir.1992) (citing Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.1981)). This Circuit has stated that courts should consider Rule 12(b)(1) jurisdictional challenges before addressing Rule 12(b)(6) challenges. United States ex rel. Settlemire v. District of Columbia, 198 F.3d 913, 920 (D.C.Cir.1999) (citing United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1155-56 (2d Cir. 1993)). Put simply, [w]here ... the defendant moves for dismissal under Rule 12(b)(1) ... as well as on other grounds, "the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined." Rhulen Agency, Inc. v. Ala. Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir.1990) (quoting 5 Charles Alan Wright & Arthur R. Miller, FED. PRAC. & PROC. § 1350); see also Bell v. Hood, 327 U.S. 678, 682, 66 S. Ct. 773, 90 L. Ed. 939 (1946) (holding that a motion to dismiss for failure to state a claim may be decided only after finding subject matter jurisdiction); but cf. Jones v. Georgia, 725 F.2d 622, 623 (11th Cir. 1984) (noting that "exceptions" to this "generally preferable approach" exist when a plaintiff's claim has no plausible foundation or is clearly foreclosed by Supreme Court precedent). B. Legal Standard for Sua Sponte Dismissal for Failure to State a Claim A court can dismiss a complaint sua sponte for failure to state a claim for which relief can be granted if, "taking all the material allegations of the complaint as admitted and construing them in the plaintiff's favor," the court determines that the plaintiff's complaint could not possibly entitle him to relief. Razzoli v. Fed. Bureau of Prisons, 230 F.3d 371, 373-74 (D.C.Cir. 2000); see also 5B FED. PRAC. & PROC. § 1357 (noting that a court may dismiss a complaint "on its own initiative" for failure to state a claim provided that the procedure used is fair). To avoid dismissal for failure to state a claim, the complaint need only set forth a short and plain statement of the claim, giving the defendant fair notice of the claim and the grounds upon which it rests. Kingman Park Civic Ass'n v. Williams, 348 F.3d 1033, 1040 (D.C.Cir. 2003) (citing FED. R. CIV. P. 8(a)(2) and Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)). "Such simplified notice pleading is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense to define more narrowly the disputed facts and issues." Conley, 355 U.S. at 47-48, 78 S. Ct. 99 (internal quotation marks omitted). It is not necessary for the plaintiff to plead all elements of his prima facie case in the complaint, Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511-14, 122 S. Ct. 992, 152 13 L.Ed.2d 1 (2002), or "plead law or match facts to every element of a legal theory," Krieger v. Fadely, 211 F.3d 134, 136 (D.C.Cir.2000) (internal quotation marks and citation omitted). That said, "it is possible for a plaintiff to plead too much: that is, to plead himself out of court by alleging facts that render success on the merits impossible." Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1116 (D.C.Cir.2000). Yet, to avoid dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (internal quotation marks omitted); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562-63, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) (abrogating the oft-quoted language from Conley, 355 U.S. at 45-46, 78 S. Ct. 99, instructing courts not to dismiss for failure to state a claim unless it appears beyond doubt that "no set of facts in support of his claim [] would entitle him to relief"). A claim is facially plausible when the pleaded content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S. Ct. 1955). "The plausibility standard is not akin to a `probability requirement' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556, 127 S. Ct. 1955). In deciding whether to dismiss a complaint for failure to state a claim, the court must treat the complaint's factual allegationsincluding mixed questions of law and factas true and draw all reasonable inferences therefrom in the plaintiff's favor. Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C.Cir. 2003); Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002). While many well-pleaded complaints are conclusory, the court need not accept as true inferences unsupported by facts set out in the complaint or legal conclusions cast as factual allegations. Warren v. District of Columbia, 353 F.3d 36, 39-40 (D.C.Cir.2004); Browning, 292 F.3d at 242. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555, 127 S. Ct. 1955). When a court dismisses a complaint sua sponte for failure to state a claim, it must generally give the plaintiff leave to amend the complaint. Razzoli, 230 F.3d at 377. If, however, it is clear from the complaint that "the claimant cannot possibly win relief ... because the facts alleged affirmatively preclude [it]," then the court may dismiss the complaint sua sponte without granting leave to amend. Id. (quoting Davis v. District of Columbia, 158 F.3d 1342, 1349 (D.C.Cir.1998)) (internal quotation marks omitted). C. The Court Dismisses the Plaintiff's Claims Against the Capitol Police Board for Lack of Subject Matter Jurisdiction The defendants argue that the court lacks subject matter jurisdiction over the plaintiff's claims against the Capitol Police Board because the plaintiff failed to exhaust his administrative remedies with respect to those claims before filing suit. Defs.' Mot. at 10. Specifically, the defendants contend that under the Congressional Accountability Act ("CAA"), 2 U.S.C. §§ 1301 et seq., an employee may sue the Capitol Police Board for age discrimination only after completing both counseling 14 and mediation.[4] Defs.' Mot. at 8, 10. The defendants argue that this requirement is a jurisdictional prerequisite to the court's jurisdiction and is therefore not subject to equitable exception. Id. at 10. In response, the plaintiff concedes that he failed to exhaust his administrative remedies, but argues that his failure should be excused because attempts at administrative remediation would have been futile, given statutory language that made the assignment of the plaintiff to a civilian role unappealable. See Pl.'s Opp'n at 18-22. The plaintiff also argues that the Capitol Police Board should be estopped from relying on the plaintiff's failure to exhaust his administrative remedies because the plaintiff reasonably relied on a Capitol Police Board official's statement that no further administrative action was necessary following the completion of counseling. Id. at 23-24. Under the CAA, the requirement that a plaintiff complete both counseling and mediation before suing for discrimination is a prerequisite to a court's exercise of jurisdiction. Blackmon-Malloy v. U.S. Capitol Police Bd., 575 F.3d 699, 705 (D.C.Cir.2009) (citing 2 U.S.C. § 1408(a)). Because the counseling and mediation requirements are jurisdictional prerequisites, courts have "no authority to create equitable exceptions to [them]." Id. at 704 (citing Bowles v. Russell, 551 U.S. 205, 127 S. Ct. 2360, 168 L. Ed. 2d 96 (2007)); see also Spinelli v. Goss, 446 F.3d 159, 162 (D.C.Cir.2006) (concluding that "a court may `not read futility or other exceptions into statutory exhaustion requirements where Congress has provided otherwise'" (quoting Booth v. Churner, 532 U.S. 731, 741 n. 6, 121 S. Ct. 1819, 149 L. Ed. 2d 958 (2001))). In this case, there is no dispute that the plaintiff failed to complete mediation as required by the CAA. Office of Compliance Certificate of Official R. ¶ 5. Because the mediation requirement is a jurisdictional prerequisite, this court lacks the authority to excuse the plaintiff's failure to complete mediation on equitable grounds.[5]Blackmon-Malloy, 575 F.3d at 705-06. Accordingly, the court grants the defendants' motion to dismiss the plaintiff's claim against the Capitol Police Board for lack of subject matter jurisdiction. D. The Court Dismisses the Plaintiff's Claims Against the Library of Congress 1. The Court Declines to Dismiss the Plaintiff's Claims Against the Library of Congress for Lack of Subject Matter Jurisdiction The defendants assert that the court similarly lacks subject matter jurisdiction over the plaintiff's claims against the Library of Congress because the plaintiff failed to exhaust his administrative remedies with respect to those claims. Defs.' Mot. at 12-14. Although the plaintiff does 15 not respond specifically to this argument in his opposition, it would appear that he intended his arguments for an equitable exception to the exhaustion requirement to apply to the Library of Congress as well as to the Capitol Police Board. See Pl.'s Opp'n at 18-22. Unlike the Capitol Police Board, the Library of Congress is subject to the ADEA directly rather than via the CAA. See 29 U.S.C. § 633a (specifying that all personnel actions at the Library of Congress "shall be made free from any discrimination based on age"). This distinction is significant because, in contrast to the mediation and counseling requirements of the CAA, the administrative exhaustion requirement of the ADEA is not a jurisdictional prerequisite "but rather a statutory condition precedent ... subject to waiver, estoppel, and equitable tolling." Kennedy v. Whitehurst, 690 F.2d 951, 961 (D.C.Cir. 1982); see also Evans v. Sebelius, 674 F. Supp. 2d 228, 239 (D.D.C.2009) (explaining that exhaustion of administrative remedies under the ADEA "is not jurisdictional, but operates as a statute of limitations defense"); Cruz-Packer v. District of Columbia, 539 F. Supp. 2d 181, 190 (D.D.C. 2008) (noting that "[t]he administrative requirements of ... the ADEA are not jurisdictional"); but see Rann v. Chao, 346 F.3d 192, 195 (D.C.Cir.2003) (holding that ADEA administrative exhaustion is subject to equitable exception but noting some inconsistency regarding whether the requirement might nevertheless be in some sense a jurisdictional prerequisite and declining to resolve the issue); Coghlan v. Peters, 555 F. Supp. 2d 187, 191 (D.D.C. 2008) (noting uncertainty within the district but declining to treat the ADEA's administrative exhaustion requirement as jurisdictional). Because the administrative exhaustion requirement in the ADEA is not jurisdictional, the defendants' arguments regarding the plaintiff's failure to exhaust his administrative remedies do not call into question the court's jurisdiction over the plaintiff's claims against the Library of Congress. Accordingly, the court denies the defendants' motion to dismiss the plaintiff's claims against the Library of Congress for lack of subject matter jurisdiction and turns to consider the merits of the plaintiff's claims. 2. The Court Dismisses the Plaintiff's Claims Against the Library of Congress for Failure to State a Claim for Which Relief Can Be Granted The plaintiff alleges that upon the merger of the Library Police and the Capitol Police, he was denied the opportunity to continue to receive advanced training, serve as a police officer and advance in rank and pay due to his age. See Compl. ¶¶ 5, 9. He contends that this treatment constituted age discrimination in violation of the ADEA. See id. ¶ 12. As noted, the Merger Act imposed a maximum age limit for Library Police officers transferring to the Capitol Police, restricting to civilian employment those officers who would not have completed twenty years of federal service by the time they reached the age of sixty. 121 Stat. 2546 § 2(b)(1)(A)(i). Capitol Police officers are law enforcement officers. See Riggin v. Office of Senate Fair Employment Practices, 61 F.3d 1563, 1568 (D.C.Cir.1995) (concluding that "[i]t would make no sense" to distinguish Capitol Police from "other law enforcement officers" for purposes of the age discrimination statute). Maximum age limits for federal law enforcement personnel are a recognized exception to the ADEA's prohibition on age discrimination. See 5 U.S.C. § 3307(d) (granting agency heads the authority to fix minimum and maximum age limits for federal law enforcement officers); Stewart v. Smith, 673 F.2d 485, 492 (D.C.Cir.1982) (concluding that § 3307(d) serves as an exception to the ADEA); see also Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 69, 120 16 S.Ct. 631, 145 L. Ed. 2d 522 (2000) (noting in dicta that mandatory age limits for federal law enforcement officers are "exempted from the [ADEA's] coverage"); Johnson v. Mayor & City Council of Balt., 472 U.S. 353, 366 n. 10, 105 S. Ct. 2717, 86 L. Ed. 2d 286 (1985) (explaining that "Congress, of course, may exempt federal employees from application of the ADEA"). Accordingly, even if the plaintiff's allegations are true, see Holy Land Found., 333 F.3d at 165, he has not stated a cognizable claim for relief under the ADEA because Congress's imposition of a mandatory age limit on Library Police officers transferred to the Capitol Police does not violate the ADEA.[6]Rovillard v. U.S. Capitol Police Bd., 691 F. Supp. 2d 9, 11-12 (D.D.C.2010) (granting summary judgment for the Capitol Police Board in a nearly identical suit because the age restrictions imposed by the Merger Act are "exempted from the ADEA"); accord Fraternal Order of Police Library of Congress Labor Comm. v. Library of Congress, 692 F. Supp. 2d 9, 18-19 (D.D.C.2010). Although courts ordinarily grant plaintiffs the opportunity to amend their complaints following dismissal for failure to state a claim, Razzoli, 230 F.3d at 377, the plaintiff in this case could not possibly remedy the defects in his claim through amendment because "the facts alleged [in his complaint] affirmatively preclude relief," id. Because the Merger Act's imposition of a maximum age limit on Library Police officers does not violate the ADEA, the court dismisses the plaintiff's complaint sua sponte without leave to amend for failure to state a claim for which relief can be granted. IV. CONCLUSION For the foregoing reasons, the court grants in part the defendants' motion to dismiss for lack of subject matter jurisdiction and dismisses the plaintiff's remaining claims sua sponte for failure to state a claim. An Order consistent with this Memorandum Opinion is separately and contemporaneously issued this 28th day of June, 2010. NOTES [1] Capitol Police officers are subject to mandatory retirement when they reach fifty-seven years of age or when they complete twenty years of service, whichever comes later. See 5 U.S.C. § 8335(c). As a result, the Merger Act's age limitation ensures that all transferred Library Police officers who became Capitol Police officers will face mandatory retirement when they are sixty years old at the oldest. [2] This restriction was in accordance with the Merger Act because, having become a federal law enforcement officer at age forty-eight, the plaintiff would have been able to accrue a maximum of twelve years of federal law enforcement service before his sixtieth birthday. See Compl. ¶ 4, 8; see also 121 Stat. 2546 § 2(b)(1)(A)(i). [3] The defendants also argue that the plaintiff was not an employee of the Capitol Police Board and is therefore ineligible to sue. Defs.' Mot. at 7-9. Because the court concludes that the plaintiff did not comply with the jurisdictional requirement of mediation before bringing suit against the Capitol Police Board, see infra Part III.C, the court need not consider this alternative argument. [4] The CAA applies the ADEA and other anti-discrimination laws to the legislative branch of the federal government, see 2 U.S.C. § 1302, and "provides the exclusive remedy for which legislative branch employees can bring a suit challenging employment discrimination," Adams v. U.S. Capitol Police Bd., 564 F. Supp. 2d 37, 40 (D.D.C.2008). [5] The cases the plaintiff cites as creating equitable exceptions to the exhaustion requirement concern laws for which administrative exhaustion is not a jurisdictional prerequisite. See, e.g., McCarthy v. Madigan, 503 U.S. 140, 144, 112 S. Ct. 1081, 117 L. Ed. 2d 291 (1992) (noting that although judges generally have the power to create discretionary exceptions to exhaustion requirement, "[w]here Congress specifically mandates, exhaustion is required"). [6] Although he does not raise any constitutional claims in his complaint, the plaintiff suggests in his opposition that the Merger Act's age restrictions might violate the Equal Protection Clause of the Fourteenth Amendment. See Pl.'s Opp'n at 9. Because, however, "age is not a suspect classification under the Equal Protection Clause," a statute that discriminates on the basis of age does not violate the Equal Protection Clause so long as "the age classification is rationally related to a legitimate state interest." Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 83, 120 S. Ct. 631, 145 L. Ed. 2d 522 (2000). Thus, because "it is rational to desire a young and vigorous law enforcement department," the imposition of maximum age limitations on Library Police officers is constitutional. Rovillard v. U.S. Capitol Police Bd., 691 F. Supp. 2d 9, 13 (D.D.C.2010); see also Riggin v. Office of Senate Fair Employment Practices, 61 F.3d 1563, 1571 (D.C.Cir.1995) (upholding mandatory retirement for Capitol Police officers as constitutional under the Equal Protection Clause).	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/4555663/	08/13/2020 IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE AT JACKSON Assigned on Briefs July 8, 2020 MARIO BATEMAN a/k/a MARIO WOODS v. STATE OF TENNESSEE Appeal from the Criminal Court for Shelby County No. 05-01008 James M. Lammey, Jr., Judge No. W2019-01388-CCA-R3-ECN In 2007, a Shelby County jury convicted the Petitioner, Mario Bateman a/k/a Mario Woods, of first-degree premeditated murder and sentenced him to life in prison. This court affirmed the conviction. State v. Mario Bateman a/k/a Mario Woods, No. W2007- 00571-CCA-R3-CD, 2008 WL 4756675, at 1 (Tenn. Crim. App., at Jackson, Oct. 28, 2008), perm. app. denied (Tenn. Mar. 23, 2009). The Petitioner then unsuccessfully filed, in turn, a petition for post-conviction relief, a writ of error coram nobis, and a federal habeas corpus petition. He then filed a petition for a writ of error coram nobis at issue in this case, alleging that he had newly discovered evidence in the form of an affidavit from the victim’s father asserting that the victim was “violent, aggressive, and a bully.” He contended that he may have been convicted of a lesser-included offense had the jury heard this testimony and asked that the lower court toll the statute of limitations. The lower court summarily dismissed the petition for a writ of error coram nobis, finding that the Petitioner could have discovered the evidence sooner, that the evidence was cumulative to the evidence presented at trial, and that the Petitioner had not shown that the evidence might have affected the outcome of the trial. The Petitioner filed this appeal. After review, we affirm the lower court’s judgment. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Criminal Court Affirmed ROBERT W. WEDEMEYER, J., delivered the opinion of the Court, in which JOHN EVERETT WILLIAMS, P.J., and J. ROSS DYER, J., joined. Mario Bateman a/k/a Mario Woods, Tiptonville, Tennessee, Pro Se. Herbert H. Slatery III, Attorney General and Reporter; Jonathan H. Wardle, Assistant Attorney General; Amy P. Weirich, District Attorney General; and Leslie Byrd, Assistant District Attorney General, for the appellee, State of Tennessee. OPINION I. Facts and Background This case arises from the Petitioner’s conviction of the premeditated first-degree murder of Cornelius Muhahmed, a crime for which he received a sentence of life in prison. Bateman, 2008 WL 4756675, at 1. In our opinion on the Petitioner’s direct appeal of his conviction and sentence we summarized the facts, which we condense here, as follows: Michael Watkins testified that he knew the victim, Cornelius Muhahmed, for approximately three or four months before the victim was shot and killed by the [Petitioner]. According to Mr. Watkins, he hung out with the victim at least three or four times a week. On the day of the shooting, Mr. Watkins and the victim were sitting in Mr. Watkins’[s] car in the driveway of an abandoned house at 907 Pope in Memphis, Tennessee. Mr. Watkins stated that he had his head down and was doing a crossword puzzle when he heard a loud bang. The victim yelled, “Oh, shit.” After that, Mr. Watkins heard another voice that said, “Bitch, you thought this shit was over with,” followed by more shots. Mr. Watkins stated that the shooting occurred at around 6:00 or 7:00 p.m. and it was dark outside. He and the victim had been sitting in the car a couple of hours before the shooting. Mr. Watkins was in the driver’s seat and the victim was in the passenger seat. Mr. Watkins testified that he identified the voice he heard as belonging to the [Petitioner]. He stated that he was friendly with the [Petitioner]. When the shooting occurred, Mr. Watkins looked up and saw an arm coming through the car’s sunroof with a revolver. According to Mr. Watkins, the victim stumbled out of the car after the first shot. The [Petitioner] fired additional shots at the victim. Mr. Watkins exited the car and walked around to see to the victim but the victim was gone. Mr. Watkins left the scene with a friend who pulled up in his car soon after the shooting. He stated that he was scared and just wanted to see his children. . . . Mr. Watkins stated that the [Petitioner’s] street name was “Cigarette.” Mr. Watkins testified that . . . he received a phone call from Chameka Duckett who told him that the police wanted him to bring the car back. Mr. Watkins returned to the scene in his car approximately thirty minutes later. His car was processed for evidence. Mr. Watkins was taken downtown and asked to make a statement to detectives in the Homicide 2 Department. Mr. Watkins stated that there was no blood or bullet holes in his car. Mr. Watkins told police that the voice he heard sounded like the [Petitioner’s]. Mr. Watkins identified the [Petitioner] from a photographic array of possible suspects. On cross-examination, Mr. Watkins testified that he never saw the [Petitioner’s] face, but he recognized the [Petitioner] from behind as he ran down Pope Street. He further identified the clothing the [Petitioner] wore as black jeans and a sweatshirt with a hood. Mr. Watkins stated that when he saw the [Petitioner] earlier that evening, he was wearing black jeans, a black shirt and a black leather jacket. . . . Chameka Duckett testified that she knew both the victim and the [Petitioner] from the neighborhood. She stated that she also knew Mr. Watkins, and had “hung out” with Mr. Watkins and the victim on the day of the shooting. She recalled seeing the two men in Mr. Watkins’[s] car in the driveway of the abandoned house next door to her house. According to Ms. Duckett, a third man named York, whom she referred to as a neighborhood crack addict, was in the backseat of the car with the two other men. She was taking a bath when she heard gunshots outside her window. Ms. Duckett continued her bath for another twenty minutes after hearing the gunshots. When she saw the blue lights from police cars, she got out of the bathtub, put on her clothes, and went outside to see what had happened. Police officers came to her house and asked if she knew of Mr. Watkins’[s] location. She called Mr. Watkins on his cell phone and told him that the police wanted him to return his car to the scene. Ms. Duckett also testified that she was at a store on Pope Street approximately one month before the shooting when she saw the [Petitioner] getting up off the ground after an altercation with the victim. She stated that she went downtown to the Homicide Department and made a statement to Sergeant Woodard the day after the shooting. She identified a photograph of the [Petitioner] from a photographic array of possible suspects she was shown. Ms. Duckett also told police that York was present in Mr. Watkins’[s] car at the time of the shooting. Ms. Duckett stated that York died before trial. Abraham Smith testified that on December 3, 2004, he lived on Kippley Street and had just exited his car in his driveway when he heard a gunshot. He walked around to the rear of his car when he saw the victim beating on the side door of his house. He called out to the victim. The 3 victim came over to Mr. Smith and told him he had been shot and told him to call 9-1-1. According to Mr. Smith, the victim’s legs began to get weak. Mr. Smith stayed with the victim who kept repeating, “I don’t want to die . . . Hurry and call the ambulance.” The victim fell to the ground. Mr. Smith kept asking the victim who shot him, but the victim did not respond. Officer Warren arrived and asked the victim who shot him. Officer Warren instructed Mr. Smith to move away from the victim. Mr. Smith did not hear the victim’s response to the officer’s question. .... Ralph Avery testified that he was a firefighter/paramedic with the Memphis Fire Department. He recalled that he responded to a call at a house on Kippley Street at approximately 7:00 p.m. on December 3, 2004. He and his partner encountered the victim lying on the street with a pulse and eye movement. Mr. Avery observed two gunshot wounds to the victim’s chest. Mr. Avery asked the victim about his injuries but got no response. Mr. Avery noted that the victim was . . . close to death. Officer Michael Warren testified that on December 3, 2004, he was a patrol officer with the central precinct when he responded to a “possible shooting with one down” on Kippley Street. He arrived at the scene and found the victim lying on the ground. Officer Warren immediately ran over to the victim and began talking to him. He asked the victim who shot him. The victim responded “Mario Woods.” He asked the victim for the shooter’s street name and the victim told him “Cigarette.” Officer Warren stated that he knew that the [Petitioner] went by the street name Cigarette. Officer Warren did not know where the victim had been shot and did not see any blood. The victim threw up and then began losing consciousness. Officer Warren continued to try to talk to the victim who had closed his eyes and was breathing very slowly. Officer Warren remained at the scene after paramedics transported the victim. .... Officer Bonzell Bibbs testified that he was a Patrol Officer with the Memphis Police Department in December of 2004 when he responded to a call on Kippley Street. After Officer Bibbs heard the victim tell Officer Warren that an individual named “Mario Woods” shot him, he went over to Pope Street where the shooting occurred. As he searched Pope Street for signs of a crime scene, a woman came running up to him and said, 4 “Cigarette shot him—Cigarette shot him.” Officer Bibbs knew Cigarette’s given name and identified him as the [Petitioner]. .... William Woodard testified that he was a Sergeant in the Homicide Bureau with the Memphis Police Department on December 3, 2004. Further, he was assigned to investigate the shooting of the victim by the [Petitioner]. He stated that the shooting occurred between 6:00 and 7:00 p.m., and the felony response team was dispatched to cover the scene before his arrival at 10:00 p.m. . . . Sergeant Woodard spoke with Mr. Watkins and Ms. Duckett at the scene and later took statements from them downtown. Sergeant Woodard learned that the victim had identified the [Petitioner] as both Cigarette and as Mario Woods. Sergeant Woodard asked both Mr. Watkins and Ms. Duckett to identify the [Petitioner] from photographic arrays of numbered but unnamed suspects to make sure that his investigation was focused on the correct individual. He stated that the [Petitioner] used at least three different names. Sergeant Woodard testified that . . . [t]he murder weapon was never recovered. .... Dr. Kenneth Snell testified that . . . the gunshot wounds likely caused the victim’s death. . . . Vanessa Luellen testified that on the day of the shooting, she saw the victim coming out of the neighborhood store on Pope Street with Michael Watkins. Later that day, she called the victim back to her house just to make sure he was all right. Ms. Luellen stated she had started doing this ever since the [Petitioner] threatened the victim. She stated that she had come to know the [Petitioner] through others in the neighborhood. She knew the [Petitioner] as Mario Woods, Mario Bateman, and Cigarette. According to Ms. Luellen, the victim hit the [Petitioner] in an altercation at the neighborhood store on Pope Street. Ms. Luellen said that the [Petitioner] was angry with the victim and described their relationship as strained. Ms. Luellen testified that she saw the [Petitioner] just before Thanksgiving. At that time, the [Petitioner] told her, “I'm going to blow 5 your cousin’s ass off. I ain’t forgot.” Ms. Luellen also overheard another remark by the [Petitioner] while he was hanging out in the lot next door to her house. Some neighborhood men were teasing the [Petitioner] about getting hit by the victim. The [Petitioner] responded, “I’m going to blow that motherf* ker’s ass off.” She stated that after he made this comment, she confronted the [Petitioner] and told him that the victim had a family who would not just sit by and let him do something to the victim. Ms. Luellen also stated that a little while later, she saw the [Petitioner] and the victim sitting outside her house, drinking and smoking marijuana together. When she asked what was going on, the [Petitioner] informed her that they had worked out their differences. Ms. Luellen testified that after she heard that the victim had been shot, she ran to the scene of the shooting but was unable to see the victim. Later that night, she was able to view the victim’s body at the hospital. She spoke with police and gave a statement about the prior altercation between the [Petitioner] and the victim. Ms. Luellen identified the [Petitioner] from a photographic array provided to her by police. .... Sherhonda Coleman testified that she knew the victim as her boyfriend and had dated him for about two-and-half months before he was shot and killed on December 3, 2004. She stated that she also knew the [Petitioner], who was her mother’s boyfriend. She had known the [Petitioner] for approximately three years. According to Ms. Coleman, a conflict arose between the [Petitioner] and the victim when Ms. Coleman brought the victim home to her mother’s house. The [Petitioner] told the victim to be quiet and later told him that he was not supposed to be in the house. Ms. Coleman recalled that on a separate occasion, she went with her mother to the [Petitioner’s] father’s house to visit the [Petitioner] after a fight between the [Petitioner] and the victim. She saw that the [Petitioner] was bleeding and had injuries to his face. Ms. Coleman continued to see the [Petitioner] at her mother’s house, and he told her at one point, “I’m going to kill that n ger for hitting me.” She stated that the victim maintained his distance after the fight, and appeared to be afraid of the [Petitioner]. Ms. Coleman said that she also feared the [Petitioner] because of fights she witnessed between him and her mother. Ms. Coleman learned of the victim’s death when her mother picked her up from work on the night of the shooting. She did not speak to the [Petitioner] again until after he was incarcerated. She recalled that the [Petitioner] apologized to her for 6 what had happened and wished her luck with her new baby. On cross-examination, Ms. Coleman testified that she saw the wound on the [Petitioner’s] head after his fight with the victim. She stated that the [Petitioner] had to have stitches. She stated that she did not see the [Petitioner] and the victim together again at any time after the fight. The [Petitioner] was convicted of first degree murder and sentenced to life imprisonment. . . . Bateman, 2008 WL 4756675, at 1-6. The Petitioner appealed his conviction contending that the trial court erred when it (1) admitted into evidence the victim’s dying declarations in violation of the Petitioner’s Sixth Amendment right to confrontation, (2) permitted the prosecution to inquire into a witness’s prior felony convictions on direct examination, and (3) allowed a witness, on redirect examination, to read into evidence the witness’s entire statement that the witness had previously given to the police. This court affirmed his conviction. The Petitioner then filed a petition for post-conviction relief. Mario Bateman v. State, No. W2011-01178-CCA-R3-PC, 2012 WL 2866009, at 1 (Tenn. Crim. App., at Jackson, July 12, 2012), perm. app. denied (Tenn. Nov. 21, 2012). During those proceedings, the Petitioner’s trial counsel testified that the Petitioner wanted the defense theory to be that he did not commit the crimes, but in trial counsel’s opinion, the better course was to present a voluntary manslaughter defense. Id. He noted the history of animosity between the Petitioner and the victim, including a recent incident that required the Petitioner to get stitches. Id. He said he and the Petitioner “came to loggerheads” over the Petitioner’s proposed defense. Id. This court held that the Petitioner had not proven that he was entitled to post-conviction relief. Id. The Petitioner then filed a petition for a writ of error coram nobis in which he contended that trial counsel failed to have a mental evaluation performed on him to determine his competency.1 The trial court denied the petition, and the Petitioner appealed. He later voluntarily dismissed his appeal. The Petitioner then filed the petition for a writ of error coram nobis at issue in this case, eleven years after his conviction. In it, he contended that there was “newly discovered evidence” in the form of a statement by the victim’s father regarding a prior altercation the victim had with the Petitioner. The victim’s father said that the victim was “violent, aggressive, and was bullying and threatening the life of the Petitioner.” The 1 The grounds for the first writ of error coram nobis are taken as articulated by the Petitioner in his second petition for a writ of error coram nobis. 7 victim’s father said that he believed that the Petitioner had shot and killed the victim in self-defense. The Petitioner offered an affidavit of the victim’s father. The Petitioner contended that, had the jury heard this testimony, the Petitioner would have been convicted of a lesser-included offense. The State filed a motion to dismiss the Petitioner’s petition for a writ of error coram nobis. The State contended that the petition did not meet the necessary requirements because the substance of the information at issue was known to the Petitioner and presented at trial. The State contended that the Petitioner had further failed to demonstrate that, had the testimony at issue been presented, the results of his trial may have been different. The trial court reviewed the petition and the State’s motion to dismiss, and it agree with the State. The trial court found: Upon review of the [P]etitioner’s pleading, including the attached affidavit of [the victim’s father], the arguments of the State and the trial record, this court finds, even if newly discovered, the evidence as outlined in [P]etitioner’s pleadings is merely cumulative to other evidence in the record. The purpose of the writ is to bring to the court’s attention some fact that was, even in the exercise of due diligence, previously unknown. . . . To be considered “newly discovered,” the evidence must have been unknown to the defendant at the time of the proceedings giving rise to his conviction. . . . Here, the evidence relates to an incident which was fully described by the witnesses at trial, the prior altercation between the victim and the defendant in which the victim beat the [Petitioner]. It further relates to prior potentially criminal conduct of the victim, a fact that, if not known, could have easily been discovered by [the] [Petitioner] prior to trial. . . . . This court determines that [the Petitioner’s] petition fails to establish he was without fault in discovering the information at issue; fails to establish the information was unknown to him or is anything more than cumulative to evidence presented at trial; and fails to establish, even if presented at trial, that i[t] may have affected the jury’s verdict or the outcome of his trial. Therefore, the court determines the [petition] should be dismissed and grants the State’s motion. (citations omitted). It is from this judgment that the Petitioner now appeals. II. Analysis 8 On appeal, the Petitioner contends that the trial court erred when it dismissed his petition for a writ of error coram nobis. He asserts that the affidavit from the victim’s father contains evidence that is “newly” discovered and that the outcome of his trial would have been different had the jury heard the evidence. The State counters that neither the victim’s father’s affidavit nor the Petitioner’s father’s affidavit are contained in the record and, as such, the Petitioner has waived this issue. In his reply brief, the Petitioner contends that the trial court’s order indicates that it reviewed these affidavits and that the Petitioner has made all possible attempts to ensure the affidavits’ inclusion in the record. It is well-established that the writ of error coram nobis “is an extraordinary procedural remedy . . . [that] fills only a slight gap into which few cases fall.” State v. Mixon, 983 S.W.2d 661, 672 (Tenn. 1999). The decision to grant or to deny a petition for the writ of error coram nobis on its merits rests within the sound discretion of the trial court. Ricky Harris v. State, 301 S.W.3d 141, 144 (Tenn. 2010) (citing State v. Vasques, 221 S.W.3d 514, 527-28 (Tenn. 2007)). We, therefore, review for abuse of discretion. See State v. Workman, 111 S.W.3d 10, 18 (Tenn. Crim. App. 2002). Tennessee Code Annotated section 40-26-105(b) provides, in pertinent part: Upon a showing by the defendant that the defendant was without fault in failing to present certain evidence at the proper time, a writ of error coram nobis will lie for subsequently or newly discovered evidence relating to matters which are litigated at the trial if the judge determines that such evidence may have resulted in a different judgment, had it been presented at trial. A petition for a writ of error coram nobis “‘may be dismissed without a hearing, and without the appointment of counsel for a hearing’” if the petition does not allege facts showing that the petitioner is entitled to relief. Bernardo Lane v. State, No. W2008- 02504-CCA-R3-CO, 2009 WL 4789887, at 5 (Tenn. Crim. App., at Jackson, Dec. 11, 2009), perm. app. denied (Tenn. June 17, 2010) (citations omitted). “As a general rule, subsequently or newly discovered evidence which is simply cumulative to other evidence in the record . . . will not justify the granting of a petition for the writ of error coram nobis when the evidence, if introduced,” might not have resulted in a different outcome. State v. Hart, 911 S.W.2d 371, 375 (Tenn. Crim. App. 1995) (citations omitted); see also Vasques, 221 S.W.3d at 525-28 (noting that proper standard of review is whether the proffered evidence “might have” resulted in a different outcome rather than whether it “would have” resulted in a different one). The State is correct that the affidavits are not included in the record, which would 9 normally result in waiver of the issue. The Petitioner, however, is correct that the trial court’s order indicates that it reviewed the affidavits, and there is an order in the record from this court directing the trial court to submit the affidavits. Therefore, it would not be equitable to the Petitioner to waive the issue. This still, however, does not result in the Petitioner receiving the relief he seeks. Even if this court were to take as true the Petitioner’s recount of the “newly” discovered evidence, we conclude that his petition still fails. First, the evidence does not constitute newly discovered evidence. In order to qualify as newly discovered evidence, “the proffered evidence must be (a) evidence of facts existing, but not yet ascertained, at the time of the original trial, (b) admissible, and (c) credible.” Nunley v. State, 552 S.W.3d 800, 816 (Tenn. 2018) (citations omitted). In addition, the coram nobis petition must show why the newly discovered evidence “could not have been discovered in a more timely manner with the exercise of reasonable diligence” and how the newly discovered evidence, had it been admitted at trial, “may have resulted in a different judgment.” Id. The Petitioner has not offered an explanation about why the evidence could not have been discovered in a timelier manner with the exercise of reasonable diligence. The Petitioner’s father’s affidavit, which described the injuries from the fight that occurred before the shooting, was clearly discoverable in a timelier fashion. Arguably, the victim’s father’s assertions that the victim was a violent bully was also discoverable. It simply should not have taken the Petitioner eleven years to find and offer this evidence. Further, we agree with the trial court that the evidence is cumulative to that presented at trial. Multiple witnesses described the altercation between the victim and the Petitioner. The Petitioner knew the extent of this altercation and the extent of his injuries. The Petitioner chose to present a defense based upon mistaken identity and did not want to present a defense based upon the victim being aggressive or violent or a bully. Counsel encouraged the Petitioner to offer a defense based upon voluntary manslaughter, and the Petitioner refused. Under those circumstances, evidence that the victim was aggressive or a bully would not have aided the Petitioner’s defense. After review, we conclude that the trial court did not abuse its discretion when it held that the Petitioner was not entitled to coram nobis relief. III. Conclusion After a thorough review of the record and the applicable law, we conclude the trial court properly denied the Petitioner’s petition for a writ of error coram nobis. In accordance with the foregoing reasoning and authorities, we affirm the trial court’s judgment. 10 ________________________________ ROBERT W. WEDEMEYER, JUDGE 11	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/2476666/	748 F. Supp. 2d 1184 (2010) CALIFORNIA ASSOCIATION OF RURAL HEALTH CLINICS and Avenal Community Health Center, Plaintiffs, v. David MAXWELL-JOLLY, Director of California Department of Health Services; Toby Douglas, Chief Deputy Director for Health Care Programs of the California Department of Health Care Services; and the California Department of Health Care Services, Defendants. No. CIV. S-10-759 FDC/EFB. United States District Court, E.D. California. October 18, 2010. 1186 Asha Kaur Jennings, Kathryn Ellen Doi, Murphy Austin Adams & Schoenfeld, LLC, Sacramento, CA, for Plaintiffs. Kara Kathleen Read-Spangler, Attorney General's Office for the State of California, Sacramento, CA, for Defendants. MEMORANDUM AND ORDER FRANK C. DAMRELL, JR., District Judge. This matter is before the court on plaintiffs California Association of Rural Health Clinics ("CARHC") and Avenal Community Health Center ("ACHC") (collectively, "plaintiffs") motion for summary judgment. The parties agree this case presents purely legal questions involving the federal Medicaid law definitions of mandatory Rural Health Clinic ("RHC") and Federally-Qualified Health Center ("FQHC") services benefits, and thus, resolution of the case via plaintiffs' motion for summary judgment is appropriate.[1] Plaintiffs contend Congress defined both Medicare and Medicaid RHC and FQHC services benefits to include the Medicare core service[2] identified in 42 U.S.C. § 1395x(aa)(1), which plaintiffs assert requires both programs to reimburse RHCs and FQHCs for the services of medical doctors, dentists, and subject to certain limitations, the services of optometrists, podiatrists and chiropractors. California's Medicaid program, Medi-Cal, formerly reimbursed RHCs and FQHCs for adult dental, chiropractic, optometric and podiatric services. However, on February 19, 2009, the California legislature adopted California Welfare & Institutions Code § 14131.10 ("§ 14131.10") which ended coverage of certain Medicaid benefits to the extent they are "optional" under federal law, including, among others not relevant here, adult dental, podiatry, optometry, and chiropractic services, beginning July 1, 2009. Since that date, defendant California Department of Health Care Services ("DHCS"), the state agency that administers the Medi-Cal program, has discontinued reimbursement to RHCs and FQHCs for most of these services provided to Med-Cal beneficiaries. In opposing the motion, defendants describe that they recently reinstated reimbursement for optometry services provided by RHC/FQHCs, 1187 having determined that the Medicaid Act requires payment for optometry services, even if not included in the State Medicaid Plan ("State Plan"), if the State Plan had previously provided these services (42 U.S.C. § 1396d(e)). Defendants indicate reimbursement will be retroactive to July 1, 2009. Thus, at issue on the motion is only § 14131.10's exclusion of coverage of adult dental, podiatry and chiropractic services. By this action, plaintiffs, an association of RHCs (plaintiff CARHC) an a FQHC (plaintiff ACHC), seek declaratory and injunctive relief to stop the continued implementation of § 14131.10 in a manner that they allege conflicts with the federal statutory mandates to reimburse RHCs and FQHCs for providing the subject adult dental, podiatry and chiropractic services. Plaintiffs contend that under the Supremacy Clause, applicable federal law preempts any State law excluding these mandatory services benefits from coverage. Additionally, plaintiffs contend that defendants have violated federal law because DHCS has not received federal approval of its proposed changes to the State Plan reflected in § 14131.10, discontinuing reimbursement of RHCs and FQHCs for these core services. Defendants oppose the motion, arguing preliminarily that plaintiffs' motion should be denied because a private right of action does not exist to bring either of plaintiffs' claims. Alternatively, defendants request a stay of the action. Should the court reach the merits of the action, defendants argue the atissue services are optional benefits which are not statutorily mandatory services for which RHCs and FQHCs are required to be reimbursed. Accordingly, the state law's exclusion of coverage for these services is permissible, and thus, there is no conflict with federal law. Defendants further contend that federal law does not require that they receive prior federal approval before implementation of any changes to the State Plan. The court heard oral argument on the motion on October 8, 2010. By this order, it now renders its decision, GRANTING in part and DENYING in part plaintiffs' motion. The court finds that plaintiffs have a right under federal law to bring both of their claims, and there is no basis to stay the action. As for the merits, the courts finds that plaintiffs have not demonstrated § 14131.10 conflicts with federal law as the subject benefits are not mandatory services under federal Medicaid law required to be reimbursed to RHCs and FQHCs. However, federal law does require prior federal approval of changes to the State Plan at issue here, and thus, plaintiffs are entitled to a declaration finding as such as well as an injunction precluding further enforcement of § 14131.10 with respect to the subject benefits until the State's plan amendment is approved. BACKGROUND[3] 1. General Factual Background Plaintiff CARHC is a California non-profit corporation, whose mission is to provide education and advocacy regarding the role of California's RHCs in the rural 1188 health care delivery system in order to further the interests of RHCs and their patients. (Defs.' Resp. to Pls.' Stmt. of Undisp. Facts ["RUF"], filed Sept. 22, 2010, ¶ 6.) CARHC currently includes in its membership 65 health care providers each of which is certified by the United States Department of Health & Human Services' Center for Medicare and Medicaid Services ("CMS") as a RHC, as defined for purposes of the Medicaid Program in 42 U.S.C. § 1396d(l)(1). (RUF ¶ 7.) RHCs operate in designated medically underserved rural areas. Many CARHC's members are enrolled in the Medi-Cal program as providers and have provided dental and podiatry services to Medi-Cal beneficiaries. (RUF ¶ 8.) CARHC brings this suit on its own behalf and in its representative capacity on behalf of its members who have been directly and adversely affected by the discontinuation of Med-Cal reimbursement for dental, podiatry, optometry or chiropractic services. (RUF ¶ s 9-10.) Plaintiff ACHC is a California non-profit corporation with its principal place of business in Avenal, California, a designated medically underserved area. (RUF ¶ 12.) Avenal is also a designated dental professional shortage area.[4] (RUF ¶ 13.) ACHC is an approved FQHC as defined by the Medicaid Program in 42 U.S.C. § 1396(l)(2), and provides health care services to Medi-Cal recipients, among others. (RUF ¶ s 16-17, 18.) As an FQHC, ACHC is required to provide care to all patients without regard to their ability to pay for such services. (RUF ¶ 19.) ACHC, as well as other FQHCs, are also required to maintain sliding fee scale policies that provide for, among other things, a 100% discount to patients whose incomes are below 100% of the Federal Poverty Guidelines, permitting only a nominal charge. (RUF ¶ 20.) Both RHCs and FQHCs can seek federal reimbursement for certain health services provided to Med-Cal beneficiaries; not all services, however, provided by these types of clinics are reimbursable. (See RUF ¶ s 18, 23, 28, 45, 46.) In February 2009, in response to California's fiscal emergency, the California legislature enacted budget measures to reduce certain state programs, including through § 14131.10, the elimination of coverage for certain Medicaid benefits it deemed "optional" under federal law. In pertinent part, § 14131.10 provides: (a) Notwithstanding any other provision of this chapter, ... in order to implement changes in the level of funding for health care services, specific optional benefits are excluded from coverage under the Medi-Cal program. (b)(1) The following optional benefits are excluded from coverage under the Medi-Cal program: (A) Adult dental services, except as specified in paragraph (2). ... (D) Chiropractic services. (E) Optometric and optician services, including services provided by a fabricating optical laboratory. 1189 (F) Podiatric services.[5] ... (2) Medical and surgical services provided by a doctor of dental medicine or dental surgery, which if provided by a physician, would be considered covered physician services, and which services may be provided by either a physician or a dentist in this state, are covered. ... (d) This section shall only be implemented to the extent permitted by federal law. The law became effective July 1, 2009. Prior to that time, RHCs and FQHCs were reimbursed for these services. (RUF ¶ s 24-27.) Plaintiffs maintain that as a result of defendants' implementation of § 14131.10 since July 1, 2009, RHCs and FQHCs have not received Medi-Cal reimbursement from DHCS for most adult dental, podiatry, chiropractic and optometry services, other than Federally-required adult dental services ("FRADS"), specified in § 14131.10(b)(2). Specifically during this time, plaintiffs have received significantly reduced Medi-Cal reimbursement for the services eliminated by the statute. (RUF ¶ s 46-52.) In that regard, plaintiffs proffer evidence that: Adventist Health RHCs have received payments for dental and podiatry services for the period July 1 to Dec. 31, 2009 that are 25 to 30% less than the payments for dental and podiatry services for the first half of 2009. (RUF ¶ s 9-11, 48.) Likewise, Medi-Cal payments for plaintiff ACHC for dental, podiatry and optometry services for the period July 1, 2009 to March 31, 2010, were approximately $19,000 per month less than the payments for these services during the preceding six months. (RUF ¶ 53.) Plaintiffs maintain that this decrease in payment has occurred during a period when they have seen an increase in demand from patients who are uninsured, and maintain that over time, RHCs and FQHCs will be forced to discontinue providing these services to their patients. (RUF ¶ s 49, 54-55, 57.) 2. Essential Statutory Background a. Federal Medicaid Law Title XIX of the Social Security Act (the "Medicaid Act") establishes a cooperative federalstate program that provides federal funding to states that choose to participate for medical assistance to low income persons. 42 U.S.C. § 1396. Medicaid is jointly financed by federal and state governments and administered by the states through a Medicaid State Plan approved by the Secretary for Health and Human Services ("HHS"). Id. at § 1396a. In exchange for federal matching funds, participating states agree to comply with federal Medicaid laws and regulations. 42 U.S.C. § 1396c; see also 42 C.F.R. § 430.35. CMS administers the Medicaid program on the Secretary of HHS' behalf, including approving State Plans. A State Plan specifies the services that the State has determined that it will provide. 42 U.S.C. § 1396d(a). Each State Plan must include seven specific types of medical services. Id. at §§ 1396a(a)(10), 1396d(a)(1)-(5), (17), (21). One of these seven services is RHC/FQHC services, the scope of which is at issue in this case. 1190 Id. at § 1396d(a)(2)(B) & (C). California's Medicaid Program is known as the California Medical Assistance Program, or "Medi-Cal." As the single state agency responsible for the Medi-Cal program, DHCS supervises and administers the State Plan. It also submits any amendments to the State Plan to CMS for review and approval. 42 C.F.R. §§ 430.12, 430.14, 430.15. Additionally, DHCS is responsible for ensuring that the Medi-Cal program provides covered services to eligible beneficiaries and for reimbursing providers for providing those covered services in compliance with the State Plan and with federal and state laws and regulations. Id. at §§ 431.1, 431.10. To be a covered service, the service must be included in the State Plan and provided by an approved Medi-Cal provider to a Medi-Cal beneficiary. See generally 42 C.F.R. § 430.10. b. RHC and FQHC Provisions under the Medicaid Act As stated above, Medicaid requires that participating states, like California, include coverage for certain specified services in their State Plan. 42 U.S.C. § 1396a(a)(10) (referring to 42 U.S.C. § 1396d(a)(1)-(5), (17), (21) and (28)). Section 1396a(a)(10) provides: A State plan for medical assistance must... (10) provide(A) for making medical assistance available, including at least the care and services listed in paragraphs (1) through (5), (17), (21) and (28) of section 1396d(a) of this title ... Section 1396d(a)(2) specifically addresses "rural health clinic services" and "Federally-qualified health center services."[6] A state may also "opt" to include in the State Plan any of the other services listed in 42 U.S.C. § 1396d(a), such as dental services. See id. at § 1396d(a)(10). Required Medicaid services thus include payment of RHC/FQHC services. Id. at § 1396d(a)(2)(B) & (C). Pursuant to said Section, a state must provide "medical assistance" to RHC/FQHCs, which: "means payment of part or all of the cost of the following care and services ...[:]" (B) consistent with State law permitting such services, rural health clinic services (as defined in subsection (l)(1) of this section) and any other ambulatory services which are offered by a rural health clinic (as defined in subsection (l)(1) of this section) and which are otherwise included in the plan, and (C) Federally-qualified health center services (as defined in subsection (l)(2) of this section) and any other ambulatory services offered by a Federally-qualified health center and which are otherwise included in the plan. This provision defines "rural health clinic services" in reference to subsection (l)(1) 1191 of § 1396d and also gives a State the option to reimburse an RHC for providing other non-specified ambulatory State Plan services. Subsection (l)(1) of § 1396d defines the terms "rural health clinic services" and "rural health clinic" as having the "meanings given such terms in section 1395x(aa) of this title, ...." Similarly, § 1396d(a)(2)(C) defines "Federally-qualified health center services" in reference to subsection (l)(2) of § 1396d and also gives a State the option to reimburse an FQHC for providing other non-specified ambulatory State Plan services. Subsection (l)(2) of § 1396d defines the term "Federally-qualified health center services" to mean "services of the type described in subparagraphs (A) through (C) of section 1395x(aa)(1) of this title when furnished to an individual as a patient of a Federally-qualified health center...." Title 42 U.S.C. § 1395x(aa) defines both "rural health clinic services" and "Federally-qualified health center services" to include: "physicians' services" (§ 1395x(aa)(1)(A)); "physician assistant or a nurse practitioner" services (§ 1395x(aa)(1)(B)); "clinical psychologist" services (§ 1395x(aa)(1)(B)); "clinical social worker" services (§ 1395x(aa)(1)(B)); and in the case of a RHC, in an area in which there exists a shortage of home health agencies, part-time or intermittent nursing care and related medical supplies furnished by a registered professional nurse or licensed practical nurse to a homebound individual under a written plan of treatment (§ 1395x(aa)(1)(C)). To this point, the parties agree on the above description of the applicable law. They also agree that "physicians' services" as referenced in § 1395x(aa)(1) are considered the "core" services for which RHC/FQHCs are entitled to be reimbursed under Medicaid. Where the parties diverge is in the next step: defining "physicians' services." Plaintiffs argue because § 1396d defines RHC and FQHC services in reference to a Medicare provision § 1395x(aa)the court should similarly look to Medicare's definition of "physician" which is contained in § 1395x(r) and includes: (1) "a doctor of medicine or osteopathy" (§ 1395x(r)(1)); (2) "a doctor of dental surgery or of dental medicine" (§ 1395x(r)(2)); (3) "a doctor of podiatric medicine" (§ 1395x(r)(3)); (4) "a doctor of optometry" (§ 1395x(r)(4)); and (5) "a chiropractor" (§ 1395x(r)(5)). Plaintiff thus argues that all of these physicians' services must be reimbursed when provided by a RHC or FQHC. They assert that since Jan. 1, 2001, California's State Plan defined RHC/FQHC services to includes these six professionals, and § 14131.10 improperly denies reimbursement for these mandatory services. Defendants contend to the contrary that there is no legal basis to turn to Medicare laws to define Medicaid requirements. Medicaid specifically defines "physicians' services" in § 1396d(a)(5)(A) as "services furnished by a physician (as defined in section 1395x(r)(1) of this title." Thus, it incorporates only part of Medicare's definition of "physician"namely, subsection 1395x(r)(1), defining "physician" as "a doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the State in which he performs such functions or action." Thus, defendants argue that certain services of dentists, optomotrists, podiatrists, and chiropractors are not mandatory services required to be reimbursed to RHCs and FQHCs. Defendants emphasize that Medi-Cal continues to reimburse RHC/FQHCs for other mandatory services, including certain 1192 dental services, psychology and optometry services. 42 U.S.C. § 1396d(a)(5) and § 1396a(a)(10)(A). For example, defendants acknowledge that certain adult dental services are federally-required (the aforementioned "FRADS"); these include: "medical and surgical services furnished by a dentist (described in section 1395x(r)(2) of this title) to the extent such services may be performed under State law either by a doctor of medicine or by a doctor of dental surgery or dental medicine and would be described in clause (A) if furnished by a physician (as defined in section 1395x(r)(1) of this title)." 42 U.S.C. § 1396d(a)(5)(B). Section 14131.10(b)(2) specifically requires coverage for these services.[7] Defendants also acknowledge that Medicaid expressly includes within the scope of covered mandatory RHC/FQHC services, "services furnished ... by a clinical psychologist or by a clinical social worker ... as would otherwise be covered if furnished by a physician." Id. at § 1395x(aa)(1)(B). As such, defendants point out that contrary to § 14131.10's exclusion of psychology services as an "optional benefit," DHCS has continued to reimburse RHC/FQHCs for these services, as the statute expressly provides that it "shall only be implemented to the extent permitted by federal law." Cal. Wel. & Inst.Code § 14131.10(d). Finally, originally following the enactment of § 14131.10, DHCS did not reimburse for optometric services. However, DHCS recently reinstated reimbursement for these services and the reimbursement will be retroactive to July 1, 2009. Defendants concede the Medicaid Act requires payment for optometry services, even if not included in the State Plan, if the State Plan had previously provided these services. 42 U.S.C. § 1396d(e). Such is the case in California, and thus, defendants now agree that despite § 14131.10's exclusion of coverage, DHCS must reimburse RHCs and FQHCs for the provision of optometric services to Medi-Cal beneficiaries. 3. Approval of State Plan Amendments The State Plan is a comprehensive written statement submitted by DHCS, describing the nature and scope of its Medicaid program and assuring it will be administered in conformity with the requirements of Medicaid law. 42 C.F.R. § 430.10 & 447.252(b). A State Plan must be approved by CMS before the State can receive federal funds for its Medicaid program. 42 U.S.C. § 1396, 1396b(a). When a State seeks to make changes to its approved State Plan, it must submit a State Plan Amendment ("SPA") to CMS so CMS may determine whether the amended State Plan continues 1193 to comply with federal requirements. 42 C.F.R. § 430.12. CMS may approve or disapprove of the SPA or it may request more information before making a determination. Id. at § 430.16. If CMS fails to act upon a submitted SPA within 90 days, the amendment is deemed approved. Id. A request for more information stops the 90-day clock. Id. at §§ 430.16(a)(2); 447.256(b). Here, DHCS submitted a SPA on June 30, 2009 which proposed to substantially exclude coverage of the subject eight Medicaid benefits provided by RHCs and FQHCs as stated in § 14131.10. (RUF ¶ s 32-34.) On October 22, 2009, CMS advised DHCS that the proposed SPA was not approvable as drafted and requested additional information. (RUF ¶ 35.) To date, no SPA has yet been approved excluding coverage of any of the Medicaid benefits listed in § 14131.10. (RUF ¶ 36.) STANDARD Under Federal Rule of Civil Procedure 56, a court shall grant a motion for summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(C). Here, the parties agree that the material facts in this action are not in dispute. Thus, it is appropriate for the court to resolve the purely legal questions presented by the action at the summary judgment stage. ANALYSIS 1. Federal Preemption Preliminarily, defendants argue plaintiffs' first claim fails because there does not exist a private right of action to challenge § 14131.10 on the basis of federal preemption.[8] Plaintiffs contend to the contrary that they have a private right to pursue an action against defendants under 42 U.S.C. § 1983, asserting a violation of the Supremacy Clause, on the basis of 42 U.S.C. § 1396a(bb) which mandates state payments for services furnished by RHCs and FQHCs. Section 1396a(bb) provides: A "State plan shall provide for payment for services ... furnished by a Federally-qualified health center and services ... furnished by a rural health clinic in accordance with the provisions of this subsection." (Emphasis added); See also § 1396a(bb)(2)-(4) repeating the same. Subsections 1396a(bb)(5)(A) and 1396a(bb)(6) (B) further provide the procedure and methodology for payment of the services: "The State plan shall provide for payment to the center or clinic of supplemental payments, no less frequently than every 4 months, in the event that payments by Medicaid managed care plans are less than the minimum reimbursement rate determined under 1396a(bb)." 42 U.S.C. § 1396a(bb)(5)(A) (emphasis added). Providing for an alternative payment methodology, § 1396a(bb)(6) (B) provides that such methodology must "result[] in payment to the center or clinic of an amount which is at least equal to the amount otherwise required to be paid to the center or clinic under this section." Id. at § 1396(bb)(6)(B) (emphasis added). In Blessing v. Freestone, 520 U.S. 329, 340, 117 S. Ct. 1353, 137 L. Ed. 2d 569 (1997), the Supreme Court established a three prong test for determining whether 1194 a particular federal statute can be enforced through a private right of action under Section 1983. The Blessing test requires that: (1) Congress intended the statutory provision to benefit the plaintiff; (2) the asserted right is not so "vague and amorphous" that its enforcement would strain judicial competence; and (3) the provision couch the asserted right in mandatory rather than precatory terms. Id. In Gonzaga University v. Doe, 536 U.S. 273, 284, 122 S. Ct. 2268, 153 L. Ed. 2d 309 (2002), the Court emphasized that in finding a private right of action, "a court must be careful to ensure that the statute at issue contains `rights-creating language' and that the language is phrased in terms of the persons benefitted, not in terms of a general `policy or practice.'" Plaintiffs concede the Ninth Circuit has yet to address the issue; however, they rely on several other circuits' decisions which have found that § 1396a(bb) gives rise to a right enforceable under Section 1983 because the statute evidences Congress' intent to benefit RHC/FQHCs, and it requires action on the part of the states, i.e., that the states reimburse RHC/FQHCs for services provided to Medicaid patients. For example, in Pee Dee Health v. Sanford, 509 F.3d 204 (4th Cir.2007), the Fourth Circuit held that § 1396a(bb) contained the type of "rights-creating" language required by Gonzaga, thus establishing a private right of action. There, plaintiff Pee Dee was a RHC serving Medicaid recipients and it brought a claim alleging that the reimbursement formula used by the South Carolina Medicaid agency violated Pee Dee's statutorily conferred right to proper reimbursement under § 1396a(bb). In this case of first impression, where the court considered whether § 1396a(bb) "read as whole" provided a private right of action,[9] the Fourth Circuit held that Congress intended in § 1396a(bb) to benefit RHCs as they are specifically described by the statute which designates them as the recipient of payment, the rights conferred by the statute were not vague, and mandatory action was required by the states (they are directed to "provide for payment of services ... furnished by" RHCs). Thus, all of the Blessing factors were met, permitting Pee Dee's action under § 1396a(bb). Id. at 211. Similarly, in Rio Grande Community Health Center, Inc. v. Rullan, 397 F.3d 56, 74 (1st Cir.2005), the First Circuit concluded that FQHCs could bring an action under § 1983 to enforce § 1396a(bb)(5)(A)'s requirements for the calculation of and time frame for supplemental payments. The court found the statutory language that a "State plan `shall provide for payment to [FQHCs] ... by the State of a supplemental payment'" to be rights-creating language which was mandatory and had a clear focus to benefit FQHCs, rather than the regulated states. Id.; accord Concilio de Salud Integral de Loiza, Inc. v. Perez-Perdomo, 551 F.3d 10, 17-18 (1st Cir.2008) (finding FQHCs had the right, under § 1983, to enforce § 1396a(bb)'s reimbursement methodology to ensure that supplemental payments were properly calculated and made); see also Chase Brexton Health Services, Inc. v. Maryland, 411 F.3d 457, 459-60 (4th Cir.2005) (FQHCs had the right to challenge state's method of calculating reimbursement); Community Health Ctr. v. Wilson-Coker, 311 F.3d 132, 135-36 (2nd Cir.2002) (FQHC could 1195 bring challenge to State's reimbursement formula as violating federal law). Defendants contend that these cases are distinguishable because what is at issue here is the scope of covered services, not § 1396a(bb)'s right of reimbursement. Defendants assert § 1396a(bb) only addresses the rights of these providers to receive payment for services; it does not address the scope of such services. And, the applicable statutes establishing what is a covered service (either § 1396x(r)(1)-(5) as asserted by plaintiffs or § 1396x(r)(1) only as asserted by defendants) are purely definitional and have no rights-creating language establishing a private right of action to enforce the provisions. Defendants' argument is both incorrect and circular. First, § 1396a(bb)(1) specifically identifies the set of services that must be reimbursed by State Medicaid agencies, like DHCS: Beginning with fiscal year 2001 with respect to services furnished on or after January 1, 2001, and each succeeding fiscal year, the State Plan shall provide for payment for services described in section 1396d(a)(2)(C) furnished by a [FQHC] and services described in section 1396d(a)(2)(B) furnished by a [RHC] in accordance with the provisions of this subsection. Thus, contrary to defendants' characterization, Section 1396a(bb) does define the scope of services for which RHC/FQHCs are entitled to reimbursement. Accordingly, there is no factual basis to distinguish the decisions of the First, Second and Fourth Circuits finding a private right of action under § 1396a(bb). Moreover, defendants appear to be arguing that because § 1396a(bb) incorporates defined terms it cannot give rise to a private right of action. However, they cite no case law in support of this argument. Indeed, defendants concede that the First, Second and Fourth Circuits have recognized private rights of action for RHC/ FQHCs to enforce § 1396a(bb). This right would be meaningless if its exercise did not extend to ensuring a provider's ability to receive payment for particular services which federal law requires State programs to cover. Finally, contrary to defendants' argument, plaintiffs here are pressing their own rights to restore coverage for services State Medicaid programs are required to cover, thereby insuring they will receive payment for furnishing these mandatory services. Plaintiffs are not bringing suit on behalf of plan beneficiaries, trying to effectuate beneficiaries' rights to particular services, and thus, there is no standing impediment. In sum, plaintiffs properly rely on § 1396a(bb) as the source of the right they seek to enforce by this action; as consistently recognized by several other circuits, said statute affords a private right of action under the test as enunciated by the Supreme Court in Blessing and Gonzaga.[10] As to the merits, plaintiffs' Supremacy Clause claim is predicated upon a 1196 theory of federal conflict preemption. Under general principles of federal preemption, state law is preempted only to the extent that it actually conflicts with federal law. Such a conflict may arise either where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Conflict preemption, in which compliance with both federal and state law is impossible, occurs when the State law would allow a different result than the applicable federal law. See Cal. Pharm. Ass'n v. Maxwell-Jolly, 630 F. Supp. 2d 1154, 1158 (C.D.Cal.2009), citing Pacific Gas & Elec. Co. v. State Energy Comm'n, 461 U.S. 190, 204, 103 S. Ct. 1713, 75 L. Ed. 2d 752 (1983). As set forth above, plaintiffs claim that § 14131.10 improperly excludes coverage for core services benefits which federal law requires States to pay for when furnished by a RHC/FQHC. Such services, plaintiffs contend, are mandatory since "physician" is defined to include, among others, dentists, podiatrists, and chiropractors. 42 U.S.C. § 1395(r)(1) to (5). Plaintiffs maintain this Medicare definition applies, as opposed to the general definition of "physicians' services" applicable to all Medicaid providers that are not RHC/FQHCs, (1) as a matter of straight statutory construction and/or (2) because Congress "clearly intended" the scope of reimbursable RHC/FQHC services under Medicaid to be broader than for other Medicaid providers. Plaintiffs contend the applicable statutes mandate this court apply the Medicare definition of "physician" to define the mandatory services since the Medicaid Act incorporates a Medicare definition of RHC and FQHC services. According to plaintiffs, the court must stay within the confines of Medicare to further define the applicable services. With respect to Congressional intent, plaintiffs cite § 1396d(a)(2)(B) and (C) which require the State to pay RHC/ FQHCs for all services defined by subsection (l)(1) and (2) and any other ambulatory services offered by the providers which are otherwise included in the plan. The statutes also require payment to RHC/ FQHCs for services provided by these providers' physician assistants, nurse practitioners, clinical psychologists, or clinical social workers. § 1395x(aa)(1)(B). This plaintiffs argue demonstrates that Congress wanted to ensure access to a more comprehensive set of minimum benefits when services were furnished by RHC/ FQHCs who care for medically underserved communities.[11] 1197 Plaintiffs also assert the court should give deference to two statements of opinion by CMS which they allege support their interpretation of the statutes at issue. First, plaintiffs' contend the court should defer to the Quevedo-Mendoza email wherein Quevedo-Mendoza told the State of North Dakota that even if it rendered dental services optional, reimbursement must continue with respect to RHC/ FQHCs for these services. (See n. 7 supra.) Plaintiffs also cite a 2003 opinion letter of Dennis Smith, CMS' Director (the "Smith Letter"), wherein he stated that "the definition of FQHC services is the same for Medicaid as it is for the Medicare program." (RUF ¶ 43.) Defendants respond that plaintiffs' argument is premised on an erroneous interpretation that the federal Medicare definition of "physician" governs for purposes of RHC/FQHC services provided to a Medicaid recipient. Defendants argue it is significant that Medicaid and Medicare define physician differently as set forth above: Medicaid limits the term to doctors of medicine and osteopathy (§ 1396d(a)(5)(A) [limiting the definition of "physician" to the definition in § 1395x(r)(1) only) while Medicare defines the term to include these doctors as well as dentists, podiatrists, optometrists and chiropractors (§ 1395x(r)(1)-(5)). Defendants emphasize case law recognizing that identical words in the same statutory scheme "need not have the same meaning `when the identical word is used in different provisions that address disparate subjects.'" (Opp'n, filed Sept. 22, 21010, at 14-15.) Here, defendants argue given the different patient populations of Medicaidlow income personsversus Medicarethe elderlyit is logical that the programs may have differing scopes and limitations. Since the court is considering application of Medicaid's requirements, defendants assert the court should turn to Medicaid's definitions unless the statute expressly requires otherwise. The court agrees with defendants, as the starting point must be the statutory language itself. It has long been the rule that "when the statutory language is plain, the sole function of the courts ... is to enforce it according to its terms." Arlington Cent. Scho. v. Murphy, 548 U.S. 291, 296-97, 126 S. Ct. 2455, 165 L. Ed. 2d 526 (2006). Here, nothing in the applicable statutes directs this court to the Medicare definition of "physician" contained in § 1395x(r)(1)-(5). Indeed, the precise term at issue is not "physician" but "physicians' services." 42 U.S.C. § 1395x(aa)(1)(A) (defining RHC and FQHC services to include "physicians' services"). That specific term is defined by the applicable Medicaid Act; § 1396d(a)(5)(A) defines "physicians' services" as: "services furnished by a physician (as defined in section 1395x(r)(1) of this title)." Thus, the specific provision directly defining "physicians' services" limits the definition to only those physicians described in § 1395x(r)(1); namely, "a doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the State in which he performs such functions or actions." 42 U.S.C. § 1395x(r)(1). Although not raised by defendants, the court is also not compelled by plaintiffs' statutory construction argument considering that numerous subsections of § 1395x(r)(2)-(5) contain certain qualifications which only relate to the Medicare statute. For example, as opposed to § 1395x(r)(1) which contains no qualification under Medicare, § 1395x(r)(3) defines a doctor of podiatric medicine "for the purposes of subsections (k), (m), (p) (1) and 1198 (s) of this section [the Medicare statute]...." There are similar qualifications for optometrists and chiropractors. Sections 1395x(r)(4) and (5) define these doctors only for purposes of certain Medicare provisions; § 1395x(r)(4) reads: "a doctor of optometry, but only for purposes of subsection (p) (1) and with respect to the provision of items or services described in subsection (s) of this section which he is legally authorized to perform as a doctor of optometry by the State in which he performs them;" § 1395x(r)(5) provides: "a chiropractor who is licensed as such by the State (or in a State which does not license chiropractors as such, is legally authorized to perform the services of a chiropractor in jurisdiction in which he performs such services), and who meets uniform minimum standards promulgated by the Secretary, but only for the purposes of subsections (s)(1) and (s)(2)(A) of this section and only with respect to treatment by means of manual manipulation of the spine (to correct a subluxation) which he is legally authorized to perform by the State or jurisdiction in which treatment is provided." Contrary to plaintiffs' argument, these qualifications suggest that the statute was intended to describe these types of doctors only with respect to Medicare. Finally, the court does not find plaintiffs' citation to the Quevedo-Mendoza email and Smith Letter persuasive. First, other than a conclusory citation to Skidmore in one sentence of its moving papers, plaintiffs fail to demonstrate what level of deference, if any at all, should be paid by this court to these types of opinion statements. Moreover, and more significantly, plaintiffs wholly fail to describe how these specific opinions relate to the present issues. It is not clear that the Mendoza email supports plaintiffs' position at all, as her remarks could also be construed as indicating that States may not withdraw coverage of FRADS services provided by RHC/ FQHCs, rather than general adult dental services. Similarly, the full context of the Smith Letter is not clear. It appears he was addressing only specific provider types, including clinical psychologists, social workers and nurse practitioners that provide a particular classification of services (behavioral services). Thus, it is not apparent that his remarks, made nearly seven years ago in 2003, even address the pertinent issue here. Accordingly, considering the relevant statutes' clear direction, the court must find that Medicaid's plain and unambiguous definition of "physicians' services" controls the scope of RHC/FQHC services required under federal Medicaid law. Because that definition renders only the services of doctors of medicine and osteopathy mandatory services, plaintiffs have not shown a conflict in federal and state law. § 14131.10's exclusion of adult dental, podiatric and chiropractic services is not in conflict with the mandates of federal Medicaid law, and thus, plaintiffs' motion for summary judgment on their claim of federal preemption is denied. 2. Prior Approval of SPAs Plaintiffs argue defendants have violated federal law by implementing § 14131.10 without first receiving approval of their proposed SPA. Such prior approval is required, contend plaintiffs, by Ninth Circuit precedent. See Exeter Memorial Hosp. Ass'n v. Belshe, 145 F.3d 1106 (9th Cir. 1998), relying on Washington State Health Facilities Ass'n v. Washington Dep't of Soc. & Health Servs., 698 F.2d 964 (9th Cir.1982) and Oregon Ass'n of Homes for the Aging, Inc. v. State of Oregon, 5 F.3d 1239 (9th Cir.1993). In Exeter, a Medicaid 1199 provider brought a § 1983 action seeking a preliminary injunction to require DHCS to stop enforcement of its new Medi-Cal reimbursement rates prior to approval of a state plan amendment submitted to HHS. The court held, reaffirming its prior holdings in Washington State Health and Oregon Ass'n of Homes, that Plan "amendments changing payment methods and standards require [prior federal] approval." 145 F.3d at 1108. The court emphasized that its holding was not based on particular statutory language relating to plan amendments but rather on the "overall statutory framework." Id. That framework the court held required that "all plans receive approval by the federal government before they may be implemented, and that all amendments to plans must also be federally approved." Id. The court held that in Washington State Health, it determined that from these requirements "logically flows the requirement that amendments to plans must be approved before implementation." Id. Defendants contend: (1) plaintiffs have no enforceable right to challenge a SPA; defendants contend that only the Secretary of HHS can challenge defendants' implementation of § 14131.10 without CMS approval (citing 42 U.S.C. § 1396c); (2) Exeter is distinguishable because it considered now repealed provisions of the Medicaid Act (the so-called Boren Amendment), and thus, its holding is inapplicable; and (3) in practice, CMS has consistently allowed DHCS to implement changes to pending SPA approvals to avoid significant delays in implementing reimbursement and/or benefit increases or reductions. Each of defendants' arguments is unavailing. First, § 1396c does not preclude plaintiffs' pursuit of this action; it merely authorizes the Secretary of HHS to terminate State funding if he finds that a State Plan is not in compliance with federal law. The statute does not preclude a private suit by a provider. Moreover, in Exeter, Washington State Health and Oregon Ass'n of Homes, the Ninth Circuit permitted similar challenges under § 1983: In Exeter, a Medicaid provider brought a § 1983 action seeking a preliminary injunction to require DHCS to stop enforcement of new Medi-Cal reimbursement rates prior to approval of a SPA by HHS; in Washington State Health, plaintiff association of health facilities sought to enjoin the Secretary of Washington State Department of Social and Health Services from enforcing a state regulation that conflicted with the federally approved State Medicaid Plan until the amendment to the plan was approved by HHS; in Oregon Ass'n of Homes, nursing homes brought an action challenging California's reclassification of nursing services into rate categories receiving lower reimbursement under the State's Medicaid Plan on the ground the State failed to submit a SPA to HHS. Thus, controlling law in this circuit permits the very type of challenge brought by plaintiffs in this case. Indeed, in Washington State Health, the court expressly held that while plaintiffs did not plead a cause of action under § 1983, "it is clear that they are properly in federal court under this provision." 698 F.2d at 965 n. 4. Second, Exeter controls here. The Ninth Circuit did not tie its holding to any specific statutory language, and thus, the subsequent repeal of the Boren Amendment does not render the decision inapposite to this case. The Ninth Circuit based its decision on the "overall statutory framework," finding that considered as a whole, that framework required that amendments to plans be approved before 1200 implementation. 145 F.3d at 1108. In fact, the arguments defendants raise here were specifically rejected by this court in the underlying decision in Exeter which the Ninth Circuit expressly adopted. Id. (stating "[w]e adopt [Judge Levi's] opinion in Exeter Memorial Hosp. Ass'n v. Belshe, 943 F. Supp. 1239 (E.D.Cal.1996)" holding "approval is required before implementation of amendments to the Plan") (emphasis added). Defendants argue that 42 C.F.R. §§ 430.16 and 447.256 support the view that "by its own regulations, the federal Medicaid statute permits implementation of a rate change before a state submits a SPA" or seeks approval of any amendment. To the contrary. Judge Levi found that § 447.256(C), requiring that a "State Plan amendment that is approved will become effective not earlier than the first day of the calendar quarter in which an approvable amendment is submitted" must be read consistently with the proposition that plan amendments must be approved prior to any implementationas the regulation provides that a SPA will "become" effective retroactively but only after federal approval. 943 F.Supp. at 1244. Judge Levi also rejected the argument that the regulations establish that CMS' request for more information operates as an "approval." Instead, he held the regulations make clear that a plan is "approved" only when CMS is satisfied with the State's assurances that the amended plan remains in compliance with the Act. Id.; 42 C.F.R. §§ 447.253(a); 430.16. Thus, as Judge Levi held, to permit implementation of a SPA without federal approval would enforce a reimbursement plan for an indeterminate period,[12] that has never been approved, that may not be approved, and that may be inadequate under the law. This would be wholly "inconsistent with the function of the State plan, the approval process for the State plans and amendments, and the [express federal] directive that the States `must pay' reimbursement according to the methods specified in an approved State plan." 943 F.Supp. at 1243. Finally, defendants' claims that CMS has in practice permitted such prior implementation of a SPA is not relevant to the court's legal inquirywhat may happen in practice does not control what the law requires. (See Orlich Decl., filed Sept. 22, 2010 [Docket #19-3].)[13] Plaintiffs are entitled to a declaration providing that defendants' implementation of § 14131.10 prior to receipt of federal approval of its SPA violates federal law, and as in Exeter, an injunction enjoining implementation of § 14131.10 with respect to the at-issue services until the State's SPA is approved by CMS.[14] CONCLUSION For the foregoing reasons, plaintiffs' motion for summary judgment is GRANTED 1201 in part and DENIED in part. The motion is DENIED with respect to the issue of federal preemption; plaintiffs have not shown that § 14131.10 conflicts with federal law mandates under the Medicaid Act. However, plaintiffs' motion is granted with respect to their challenge to defendants' implementation of § 14131.10 without first receiving CMS approval of their proposed SPA. As to that issue, plaintiffs are entitled: (1) to a declaration providing that defendants' implementation of § 14131.10 prior to receipt of federal approval of its SPA violates federal law; and (2) an injunction enjoining further implementation of § 14131.10 with respect to the subject adult dental, podiatry and chiropractic services until the State's SPA is approved by CMS. The Clerk of the Court is directed to close this file. IT IS SO ORDERED. NOTES [1] Defendants filed various objections to plaintiffs' evidence submitted on the motion (Docket #19). However, the parties agree the issues presented by plaintiffs' motion are wholly legal issues. Plaintiffs' proffered evidence provides simply context to the issues and any disputed facts created by the evidence are not material to resolution of the motion. Therefore, the court overrules defendants' objections directed at the various declarations submitted by plaintiffs in support of the motion. [2] The term "core" services is not used in the statutory scheme at issue here; however, the parties use the term in their papers to reference those services they contend are mandatory services for which RHCs and FQHCs are required to be reimbursed under Medicaid Act. Accordingly, the court likewise uses the term in the same respect herein. [3] In some limited respects, defendants dispute the facts as proffered by plaintiffs in their statement of undisputed facts. However, to the extent there is a dispute of fact, the court does not find it material to the legal issues presented by the motion, and thus, it treats the relevant fact as undisputed. Unless otherwise noted, the court finds the facts as described below undisputed. [4] Such a designation identifies areas as having a shortage of dental providers on the basis of availability of dentists and dental auxiliaries. In order to receive the designation, an area must have a dentist-to-population ratio below a set minimum and demonstrate a lack of access to dental care in surrounding areas because of distance, overutilization or access barriers. (RUF ¶ s 14-15.) [5] The statute also excludes from coverage under Medi-Cal the following services which are not at issue on the motion: acupuncture services; audiology and speech therapy services; psychology services; and incontinence creams and washes. Cal. Wel. & Inst.Code § 14131.10(b)(1)(B), (C), (G) and (H). [6] Section 1396d(a)(1) addresses "inpatient hospital services (other than services in an institution for mental diseases);" Section 1396d(a)(3) addresses "other laboratory and X-ray services;" Section 1396d(a)(4) addresses "nursing facility services;" Section 1396d(a)(5) addresses "(A) physicians' services furnished by a physician (as defined in section 1395x(r)(1) of this title), whether furnished in the office, the patient's home, a hospital, or a nursing facility, or elsewhere, and (B) medical and surgical services furnished by a dentist (described in section 1395x(r)(2) of this title) to the extent such services may be performed under State law either by a doctor of medicine or by a doctor of dental surgery or dental medicine and would be described in clause (A) if furnished by a physician (as defined in section 1395x(r)(1) of this title);" Section 1396d(a)(17) addresses "services furnished by a nurse-midwife;" Section 1396d(a)(21) addresses "services furnished by a certified pediatric nurse practitioner;" and Section 1396d(a)(28) addresses "free standing birth center services." [7] As discussed more fully below, plaintiffs vigorously dispute this interpretation of Medicaid's requirements for payment of dental services. They maintain that federal law requires State Medicaid agencies to cover dental services more broadly when provided by a RHC/FQHC. Plaintiffs contend that the scope of coverage is determined by reference to the licensure category of the individual healthcare professional, rather than to a limited set of services covered when delivered by such a professional, citing § 1395x(aa) (1)(A)-(C). As support for its interpretation, plaintiffs cite a 2003 email of Bernadette Quevedo-Mendoza, of the Office of the Regional Administrator for CMS Region VII) ("Quevedo-Mendoza email"), who advised the State of North Dakota that "dental services provided by the FQHC or RHC [must] be reimbursed even if the state drops optional dental services." (RUF ¶ 39.) Plaintiffs assert under Skidmore v. Swift and Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944) such a federal agency's construction of a statute is entitled to "respect." [8] Defendants challenge the viability of plaintiffs' § 1983 claims, raising federal preemption and failure to receive federal approval of a SPA, solely on the ground of a lack of a private right of action; they do not oppose plaintiffs' motion on the issues that (1) plaintiffs are "persons" entitled to relief under § 1983 and (2) the individual defendants acted under color of state law as required by § 1983. [9] In previous cases, courts had considered whether certain subsections of § 1396a(bb) provided a private right of action. See e.g. Rio Grande below. [10] Because the court finds that a private right of action exists, it need not consider defendants' argument that the court should nonetheless stay the action pending their pursuit of three certiorari petitions before the Supreme Court. Defendants contend that before the Supreme Court is the issue of whether a private party may bring a Supremacy Clause claim when it lacks a private right of action under Section 1983. Plaintiffs dispute this description of the pending issue, claiming that the certiorari petitions are wholly unrelated to this action as they involve the issue of whether the State is required under the Medicaid statutes to assess the impact on the quality of care and access to care before rate changes are implemented. The court need not resolve this dispute as it finds a private right of action does exist and therefore must reach the merits of this action. [11] At oral argument, plaintiffs abandoned their Congressional intent argument raised in their reply, and instead argued that the statutes were clear, on their face, and thus, the court need look no further than the plain statutory language to find in their favor. The court does not agree for the reasons set forth below. However, as a result of plaintiffs' concession at oral argument, the court does not consider the issue of Congressional intent herein. The court will note, nonetheless, that plaintiffs' argument regarding Congressional intent is more properly construed as an extension of their statutory construction argument, as they do not proffer any legislature history or other outside sources in support of their argument, but rather cite to other statutory provisions and argue that this court can glean Congressional intent from those provisions. [12] Once the agency requests more information the 90 day clock stops indefinitely. [13] Vickie Orlich, Division Chief of the Benefits, Waiver Analysis and Rates Division of DHCS, declared that "CMS has consistently allowed DHCS to implement changes in the scope of benefits or in payment methodologies before issuing approval of a SPA. CMS has always allowed DHCS to claim and receive federal Medicaid funding in accord with scope of benefit or reimbursement methodology changes pending their reviewing of a SPA concerning the particular changes. I am not aware of CMS ever requesting DHCS to postpone implementation of a SPA scope of benefit or reimbursement methodology change until CMS has approved the SPA." (Id. at ¶ 10.) [14] Defendants did not oppose plaintiffs' motion on the issue of irreparable harm, and the court finds based on the proffered evidence set forth above, that plaintiffs have shown sufficient irreparable harm if an injunction does not issue. Plaintiffs' monetary injuries are deemed to constitute irreparable harm because DHCS' status as a branch of the State government bars plaintiffs from recovering damages in federal court under Eleventh Amendment sovereign immunity protections. See California Pharmacists Ass'n v. Maxwell-Jolly, 563 F.3d 847, 851-52 n. 2 (9th Cir.2009) ("[B]ecause the Hospital Plaintiffs and their members will be unable to recover damages against the Department even if they are successful on the merits of their case, they will suffer irreparable harm if the requested injunction is not granted.") Defendants likewise do not oppose the motion on the issue of the balance of equities. To the extent the court finds a legal violation, defendants do not dispute the balance of equities tips in favor of issuance of an injunction. Here, there is no outweighing, countervailing interest; while California has sought to implement § 14131.10 as a budget measure, under the circumstances, that interest does not outweigh plaintiffs' essential role in California's health care safety net, the need for continued Medicaid reimbursement to sustain the delivery of services to Medicaid and uninsured beneficiaries, and the interests of Medicaid beneficiaries in receiving the full scope of RHC/FQHC services benefits as defined by Congress.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1517970/	853 F. Supp. 1016 (1994) RESOLUTION TRUST CORPORATION, Plaintiff, v. Oscar ZIMMERMAN, et al., Defendants. No. 1:93 CV 2266. United States District Court, N.D. Ohio, Eastern Division. May 27, 1994. 1017 Sophia Papandreas Tjotjos, Daniel F. Gourash, Porter, Wright, Morris & Arthur, Cleveland, OH, for Resolution Trust Corp. Mark B. Cohn, Jeffrey Arthur Huth, Mark B. Cohen, McCarthy, Lebit, Crystal & Haiman, Robert A. Goodman, Daniel D. Domozick, Goodman, Weiss & Freedman, Cleveland, OH, for Oscar Zimmerman. Gregory Zimmerman, pro se. Egidijus Marcinkevicius, Law Offices of Algis Sirvaitis, Cleveland, OH, for Almis J. Stempuzis. Steven B. Potter, Irwin Jerome Dinn, Dinn, Hochman & Potter, Cleveland, OH, for Carol Downs. ORDER SAM H. BELL, District Judge. Defendants Oscar and Gregory Zimmerman have moved individually to dismiss all claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. Docket ## 16 & 22. Both motions were argued on May 9, 1994. STATEMENT OF FACTS According to the Complaint, each defendant is a former officer and director of the Superior Federal Savings Association, located in Cleveland, Ohio. Oscar Zimmerman served on Superior's board from 1974 to 1978, and again from March 5, 1984 until February 26, 1985. Gregory Zimmerman sat on the board initially from February 26, 1980 through March 5, 1984. He returned to the board on February 26, 1985 and remained until the end of 1990. In addition, Gregory Zimmerman served as president of the association for an eleven year period stretching from February of 1980 to October 23, 1990. Complaint, ¶¶ 6, 7. Plaintiff ("RTC") alleges that Superior's board engaged in unsound lending practices throughout the periods in which the defendants were board members. On October 4, 1990, the United States Department of the Treasury's Office of Thrift Supervision ("OTS") notified appropriate authorities in 1018 the State of Ohio's Department of Commerce that grounds existed under the Home Owners' Loan Act of 1933 to appoint RTC as receiver for Superior. The Department returned its written approval of the appointment to the OTS on October 19, 1990. On October 23, 1990, Superior's board received notice that the RTC had been appointed receiver. RTC brought suit against four former officers and directors on October 22, 1993, alleging negligence, gross negligence, breach of contract and breach of fiduciary duty. RTC sought leave to amend its complaint on February 14, 1994 and appended a claim for unjust enrichment. In their present motions, the Zimmerman defendants assert, inter alia, that each of RTC's claims is either time-barred or preempted by federal statute. STANDARD OF REVIEW When considering a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), the court is constrained to accept as true the allegations of the complaint. Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S. Ct. 897, 902, 74 L. Ed. 2d 723 (1983), Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974); Lee v. Western Reserve Psychiatric Habilitation Center, 747 F.2d 1062, 1065 (6th Cir.1984). The motion to dismiss under 12(b)(6) should be denied unless it can be established beyond a doubt that the plaintiff can prove no set of facts in support of his or her claim which would entitle plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957); Nishiyama v. Dickson Cty., 814 F.2d 277, 279 (6th Cir.1897) (en banc). With these standards in mind, the court will scrutinize the complaint in order to determine whether it states a viable cause of action. LAW AND ANALYSIS The parties have expended a considerable amount of energy debating which limitations period governs this action. Before reaching that question, however, the Court must consider the preemptive scope of 12 U.S.C. § 1821(k) and its impact upon RTC's claims, both state and federal. I. Preemption. Section 1821(k) of Title 12 concerns the liability of officers and directors of insured depository institutions. It states in relevant part: A director or officer of an insured depository institution may be held personally liable for monetary damages in any civil action by, on behalf of, or at the request or direction of the Corporation, which action is prosecuted wholly or partially for the benefit of the Corporation ... acting as conservator or receiver of such institution ... for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are defined and determined under applicable State law. Nothing in this paragraph shall impair or affect any right of the Corporation under other applicable law. 12 U.S.C. § 1821(k). As this Court previously acknowledged, those courts considering the issue have not agreed on the preemptive reach of this statute. F.D.I.C. v. Bates, 838 F. Supp. 1216, 1218 (N.D.Ohio 1993) (Matia, J.). Some courts have held that § 1821(k) preempts both state and federal common law; other courts have ruled that the statute preempts federal, but not state, common law; and still others have found that § 1821(k) displaces neither state nor federal common law. Id. Nonetheless, while the ultimate conclusions differ, the arguments typically raised in support of and against preemption are identical, regardless of whether state or federal preemption is at issue. In both contexts, the preemption debate centers, quite properly, around the language of § 1821(k) itself. Those courts rejecting preemption arguments commonly focus on two features of the statute. First, they place emphasis on Congress's use of the unmodified verb "may" (i.e., "may be held liable ... for gross negligence") instead of the phrase "may only," reasoning that Congress would have employed the latter phrase had it wished to displace all other standards of 1019 liability. FDIC v. McSweeney, 976 F.2d 532, 537 (9th Cir.1992). In addition, courts avoiding preemption point to the statute's final sentence, which provides, "Nothing in this paragraph shall impair or affect any right of the Corporation under other applicable law." 12 U.S.C. § 1821(k). This savings clause, it is argued, preserves the field of state and/or federal common law from § 1821 preemption. McSweeney, id. at 538; FDIC v. Canfield, 967 F.2d 443, 446 (10th Cir.1992) (en banc). Resting primarily on this interpretation of the statute's text, the McSweeney and Canfield courts concluded that § 1821(k) does not preempt state law negligence claims. In determining that § 1821(k) does displace federal common law claims, the Seventh Circuit Court of Appeals recently rejected the interpretation of the statute approved in McSweeney and Canfield.[1]Resolution Trust Corporation v. Gallagher, 10 F.3d 416 (7th Cir.1993). Regarding Congress's failure to modify the verb "may" with the adverb "only," the court in Gallagher joined the dissent in Canfield, reasoning: "Read in context, the word `may' refers to the right of the [RTC] to bring an action under this section. `May' cannot reasonably be read to qualify the gross negligence liability standard and is therefore irrelevant to the substance of the provision." Gallagher, 10 F.3d at 420, quoting Canfield, 967 F.2d at 450 n. 4 (Borby, J., dissenting). Similarly, the Seventh Circuit court determined that the savings clause did not bar preemption. Were it construed to do so, the court reasoned, the clause would render superfluous the gross negligence standard specifically created by the statute. Id. The court adopted what it felt was a "better reading," under which the clause simply preserves the RTC's right to take regulatory action to combat simple negligence. Id. at 420-421, citing David B. Fischer, Comment, Bank Director Liability Under FIRREA: A New Defense for Directors and Officers of Insolvent Depository InstitutionsOr a Tighter Noose?, 39 UCLA L.Rev. 1703, 1771 (1992). In rejecting the common arguments against preemption, the Seventh Circuit in Gallagher concluded that Congress's intent to establish a single, federal negligence standard for director liability was manifest in the plain language of the statute itself: The plain language of § 1821(k) "speaks directly" to the issue presented in this case.... That section provides: "[a] director or officer ... may be held personally liable for monetary damages ... for gross negligence...." It is hard to imagine a more definite statement by Congress that a gross negligence standard of liability applies to cases brought by the RTC against officers and directors of failed financial institutions. Consequently, federal common law, which may or may not allow an officer or director to be held liable for less culpable conduct than gross negligence, must yield.... Gallagher, 10 F.3d at 420 (emphasis in the original quotation). The Gallagher court bolstered its conclusion with reference to § 1821(k)'s legislative history, noting, inter alia, that the Conference Report which accompanied the proposed legislation states: [Section 1821(k)] preempts State law with respect to claims brought by the FDIC in any capacity against officers or directors of an insured depository institution. The preemption allows the FDIC to pursue claims for gross negligence or any conduct that demonstrates a greater disregard of a duty of care, including intentional tortious conduct. Id. at 421, quoting H.R.Conf.Rep. No. 222, 101st Cong., 1st Sess. 393, 398 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 432, 437. In the Gallagher court's view, this language plainly demonstrates Congress's intent to make directors and officers liable solely for conduct amounting to or exceeding gross negligence. Id. The court also observed that the House Banking Committee had rejected a proposed amendment that would 1020 have reintroduced a simple negligence standard for officers and directors. Id. at 423. Having canvassed the entire legislative history, the court concluded, "we believe that the most persuasive forms of legislative history are consistent with the plain language of § 1821(k) and demonstrate that Congress intended to preempt federal common law in this area." Id. In an opinion heavily cited by the present parties, the district court for the Northern District of Indiana built upon the Gallagher decision in determining that the preemptive scope of § 1821(k) extends to state, as well as federal, common law. Resolution Trust Corporation v. O'Bear, 840 F. Supp. 1270 (N.D.Ind.1993). The O'Bear court stressed the conspicuous fact that the Congressional Report (quoted above) relied on in Gallagher "specifically notes that § 1821(k) preempts state law...." Id. at 1277. In addition, the court reasoned, enforcement of state law claims would unduly interfere with the intended federal supervision of the field. Id., citing City of Milwaukee v. Illinois, 451 U.S. 304, 316, 101 S. Ct. 1784, 1792, 68 L. Ed. 2d 114 (1981). In summation, the O'Bear court stated: Congress has undisputed power to determine the incentives and potential liabilities to being a director of a federally insured savings institution. It exercised that power with § 1821(k), and stated as much in the Conference Report.... This incursion into the states' historic police power is limited in its application to federally insured institutions. The court therefore finds, based upon Gallagher II's [Resolution Trust Corp. v. Gallagher, 800 F. Supp. 595 (N.D.Ill.1992)] construction of the statute and this court's application of City of Milwaukee, that any state-law claims pleaded by RTC ... are pre-empted by federal statute. Id. Each of the competing interpretations of § 1821(k) has some merit. Nonetheless, this court finds the reasoning of the Gallagher and O'Bear courts more persuasive, especially when considered in conjunction with the legislative history of § 1821(k). See, e.g., H.R.Conf.Rep. No. 222, 101st Cong., 1st Sess. 393, 398 (1989), reprinted in 1989 U.S.C.C.A.N. 432, 437 (quoted above at 6-7). This conclusion is consistent with, and indeed compelled by, the Sixth Circuit Court of Appeals' opinion in Gaff v. FDIC, 919 F.2d 384 (6th Cir.1990). In Gaff v. FDIC, the circuit court was asked to decide whether state or federal common law determined the priority of claims of stockholders against directors of an insolvent bank under the FDIC's control. The court held that federal legislation creating and governing the national bank insurance program had preempted state law and made a uniform rule of federal common law applicable. Id. at 387-388. The Gaff court drew support for its holding concerning preemption from several provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, including § 1821(k). Id. at 390. As the court explained: Congress [in § 1821(k)] has clearly indicated that the liability of officers and directors of a bank are determined under federal law.... The legislative history of this provision explicitly states an intent to nationalize the law of directors' and officers' liability when banks are taken over by the FDIC. Id. at 391. In light of this language, it must be concluded that the Sixth Circuit, if directly confronted with the issue, would accept the interpretations of § 1821(k) offered in Gallagher and O'Bear. Indeed, this Court has previously relied on Gaff to determine that § 1821(k) displaces federal common law claims against directors and officers of insolvent institutions. Bates, 838 F. Supp. 1216. We now take the necessary, following step and hold that state law claims are similarly preempted. Therefore, counts one, three and five of the amended complaint must be dismissed. Count four and count sixthe claims for breach of implied contract and unjust enrichment must also be dismissed. The Court doubts very seriously RTC's ability under Ohio law to resurrect its claim for breach of a fiduciary duty as additional, independent claim arising under contract law. See Nixon 1021 v. Bank One of Eastern Ohio, N.A., 74 Ohio App. 3d 550, 599 N.E.2d 742 (Franklin Co. 1991); Squire v. The Guardian Trust Co., 79 Ohio App. 371, 35 Ohio Op. 144, 72 N.E.2d 137 (Cuyahoga Co.1947). See also O'Bear, 840 F.Supp. at 1278; FDIC v. Mintz, 816 F. Supp. 1541, 1546 (S.D.Fla.1993); FDIC v. Dannen, 747 F. Supp. 1357 (W.D.Mo.1990). But see Hambleton v. R.G. Barry Corp., 12 Ohio St. 3d 179, 12 O.B.R. 246, 465 N.E.2d 1298 (1984). Regardless, the Court agrees with the conclusion reached in O'Bear: state law claims against former directors and officers of an institution in receivership, which stem from or implicate the defendants' alleged failure to act with "due care," fall within the preemptive reach of § 1821(k). O'Bear, 840 F.Supp. at 1278. See also Gaff, 919 F.2d at 391. Therefore, counts four and six of the amended complaint must be dismissed. II. The Limitations Period. Count Two of the Amended Complaint charges both defendants with gross negligence; accordingly, it states a claim under 12 U.S.C. § 1821(k) and survives preemption. At the March 9 hearing, Defendant Oscar Zimmerman conceded (and Defendant Gregory Zimmerman did not deny) that RTC's claim for gross negligence, grounded as it is in § 1821(k), arose independent of state law at the time of RTC's appointment. O'Bear, 840 F.Supp. at 1280. Thus, Defendants have waived their "non-viability" argument. The remaining issue to be considered, therefore, is whether the gross negligence claim must be dismissed as untimely filed. The limitations periods governing claims brought by the RTC in its capacity as receiver are codified at 12 U.S.C. § 1821(d)(14), which states: (A) Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be ... (ii) in the case of any tort claim, the longer of(I) the 3-year period beginning on the date the claim accrues; or (II) the period applicable under State law. (B) For purposes of subparagraph (A), the date on which the statute of limitation [sic] begins to run on any claim described in such subparagraph shall be the later of (i) the date of the appointment of the Corporation as conservator or receiver; or (ii) the date on which the cause of action accrues. 12 U.S.C.A. § 1821(d)(14) (1989). The parties agree that the statute of limitations applicable to the gross negligence claim began to run on the date RTC was appointed receiver of Superior. They disagree, however, on the exact date of appointment. Defendants argue that RTC's appointment took place on October 4, 1990, the date on which the Office of Thrift Supervision determined that receivership was necessary. Alternatively, they allow that the appointment may not have become final until the Ohio Department of Commerce's Division of Savings and Loan Associations approved the appointment on October 19, 1990. In either case, Defendants reason, the three-year limitation period provided by subparagraph (A)(ii)(I) had expired prior to RTC's filing on October 22, 1993. RTC, however, insists that its appointment was not complete until October 23, 1990, the date on which it formally accepted appointment and took possession of Superior. If this is true, RTC's complaint dated October 22, 1993, was filed within three years of the appointment. Moreover, RTC maintains, the debate over the precise appointment date is irrelevant insofar as the four-year limitations period provided in subparagraph (A)(ii)(II)[2] and not the three year window supplied in (A)(ii)(I) applies to its gross negligence claim. On the latter point, RTC is plainly incorrect. All parties agree that the gross negligence claim derives from a federal statute. Hence, the claim does not arise under state law, and there is no statute of limitations applicable under state law. Thus, subparagraph (A)(ii)(II) does not apply. We are left with the three year period provided in subparagraph 1022 (A)(ii)(I). See O'Bear, 840 F.Supp. at 1280 ("For claims created by federal statute, there simply is not an `applicable state statute of limitations' to consider"); Bates, 838 F.Supp. at 1217 (applying three-year federal statute of limitations to § 1821(k) gross negligence claim). Consequently, the fate of the remaining claim hinges on the exact date of RTC's appointment. Under the law as it existed in 1990, the Director of the Office of Thrift Supervision possessed the authority to appoint a receiver for a federally insured state savings association upon determining that certain grounds for appointment, provided by statute, existed. 12 U.S.C. § 1464(d)(2)(C) (Supp. II 1991). However, the Director was required to obtain written approval from the state official with jurisdiction over the institution (or wait thirty days for such approval) before exercising the appointment power. 12 U.S.C. § 1464(d)(2)(D) (Supp. II 1991) (amended 1991). Before the 1991 amendment, Section 1821(c)(6)(B) of Title 12 provided: Whenever the Director of the Office of Thrift Supervision appoints a receiver under the provisions of section 1464(d)(2)(C) of this title for the purpose of liquidation or winding up any savings association's affairs ... during the 3-year period beginning on August 9, 1989, the Resolution Trust Corporation shall be appointed.... 12 U.S.C.A. § 1821(c)(6)(B) (1989) (emphasis added). Despite the mandatory terms of this section, RTC maintains that it retained the right to refuse appointment. RTC attempts to draw significance from its general discretion to accept or deny the receivership of a state savings association. Section 1821(c)(3)(A) of Title 12 states: Whenever the authority having supervision of any insured State depository institution ... appoints a conservator or receiver for such institution and tenders appointment to the Corporation, the Corporation may accept such appointment. 12 U.S.C.A. § 1821(c)(3)(A) (1989) (emphasis added). But RTC ignores the limitation placed on its discretion by former § 1821(c)(6).[3] As reiterated by the Seventh Circuit in Gallagher, "`It is a cardinal principle of statutory construction that the more specific controls over the general.'" 10 F.3d at 420, quoting Central Commercial Co. v. Commissioner, 337 F.2d 387, 389 (7th Cir. 1964). Subparagraph (c)(6) of § 1821 concerning OTS appointment plainly supersedes the general provisions of subparagraph (c)(3) in this instance. Since RTC lacked discretion to refuse the appointment made by the OTS, that appointment became effective (and thus the prescriptive period began to run) on the date the appropriate state official gave her written consent. Cf. Resolution Trust Corporation v. Miramon, No. 92-2627, 1993 WL 262710 (E.D.La. July 6, 1993) (appointment under analogous provisions of 12 U.S.C. § 1729(c) effective once state authority consents); Franklin Savings Association v. Director, 740 F. Supp. 1535 (D.Kan.1990) (state concurrence a prerequisite to effective appointment). The Acting Superintendent of the Division of Savings and Loan Associations, Ohio Department of Commerce, provided written approval of RTC's appointment on October 19, 1990. RTC's failure to file its gross negligence claim within three years of that date, as required by 12 U.S.C. § 1821(d)(14), is grounds for dismissal. CONCLUSION This Court, like all others, must be ever wary of exigencies (including the savings and loan crisis) which purportedly justify deviation from established principles of law. It may not ignore precedent in this Circuit determining the preemptive scope of federal legislation simply to protect novel or formerly *1023 viable common law claims. Nor may it permit a party to advance untimely claims, no matter how meritorious, by dismissing the statute of limitations as if it were a needless or troublesome "technicality." For the foregoing reasons, Defendants' motions to dismiss (docket ## 16 & 22) are granted. IT IS SO ORDERED. NOTES [1] The Seventh Circuit court did not reach the question of whether § 1821 preempts state law claims. [2] Ohio Revised Code § 2305.09 provides a four year statute of limitations for tort claims. [3] In oral argument, RTC suggested for the first time that § 1821(c)(6) is applicable only in situations in which OTS appoints a receiver without first receiving state approval and is therefore inapplicable in the instant case in which state approval was granted. The section itself, however, contains no such limitation. On the contrary, it purports to govern all appointments made by OTS pursuant to § 1464(d)(2)(C) of Title 12. And as we have previously explained, the Director of OTS may not exercise authority pursuant to § 1464(d)(2)(C) without first seeking state approval. 12 U.S.C. § 1464(d)(2)(D).	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1527915/	982 F. Supp. 794 (1997) H. Mikel THOMAS, Plaintiff, v. TALBOTT RECOVERY SYSTEMS, INC., D/B/A Talbott-Marsh Recovery Campus, Defendant. No. 96-2311-JWL. United States District Court, D. Kansas. October 20, 1997. 795 Paul F. Pautler, Jr., Kimberly A. Jones, Blackwell, Sanders, Matheny, Weary & Lombardi, L.L.P., Gail M. Hudek, J. Camille Williams, Hudek & Associates, P.C., Kansas City, MO, for plaintiff. Laurence R. Tucker, Stuart K. Shaw, Armstrong, Teasdale, Schlafly & Davis, Kansas City, MO, C. Bradford Marsh, Anandhi S. Rajan, Arnold E. Gardner, Long, Weinberg, Ansley & Wheeler, Atlanta, GA, for defendants. MEMORANDUM AND ORDER LUNGSTRUM, District Judge. This diversity action involves a contract of employment executed by the parties that was terminated before plaintiff actually began to work for defendant. Plaintiff alleged claims 796 against defendant for breach of contract, fraudulent and negligent misrepresentation, retaliatory discharge, and defamation; defendant brought a counterclaim for breach of contract. The matter is presently before the court on defendant's motion for partial summary judgment with respect to plaintiff's misrepresentation, retaliatory discharge, and defamation claims, as well as plaintiff's claim for punitive damages (Doc. 71). In its brief in opposition to the motion (Doc. 76), plaintiff voluntarily dismissed his retaliatory discharge and defamation claims, and those claims are hereby dismissed with prejudice. With respect to the misrepresentation claims, the court grants the motion in part and denies it in part. Summary judgment is granted with respect to plaintiff's fraudulent misrepresentation claims, his claim for punitive damages, and his negligent misrepresentation claim based on a representation that defendant would change treatment models; those claims are hereby dismissed. The motion is denied with respect to plaintiff's negligent misrepresentation claim based on an alleged representation by defendant's president that he had the authority to change the treatment model; that claim survives to trial, along with the parties' breach of contract claims. I. Facts[1] Plaintiff H. Mikel Thomas, a resident of Kansas, is a psychiatrist specializing in addiction psychiatry. Defendant Talbott Recovery Systems, Inc., d/b/a Talbott-Marsh Recovery Campus (TMRC) is an addiction treatment center in Atlanta specializing in the treatment of impaired professionals, including physicians. In March of 1995, plaintiff entered into an employment contract with defendant, by which plaintiff's employment with defendant would begin on July 1, 1995. At the time of defendant's recruitment of plaintiff, Dr. Douglas Talbott, TMRC's founder, served as the company's president and medical director. Benjamin Underwood was defendant's CEO. Dr. Jerome Gropper, a former dentist, served as the executive director. Dr. Richard Irons was employed at TMRC as the associate medical director. In 1994, defendant operated under a "social model" of treatment, not a "medical model". Under a social model, physicians do not exercise primary control over patients' day-to-day treatment, as they do in a medical model of treatment. Although Dr. Talbott had the final say on all clinical decisions at TMRC, Dr. Gropper, who was not a physician, generally acted as head clinician, overseeing the day-to-day treatment of the patients and determining the length of their stay and their discharge. Physicians visited the patients only twice every month. Dr. Talbott held a "vision" under which TMRC would change to a medical model of treatment. Dr. Talbott especially desired this change in early 1995 as the new president of the American Society of Addiction Medicine. Plaintiff visited defendant in January of 1995 to discuss his employment with TMRC. During that visit, Dr. Talbott discussed his vision with plaintiff and told plaintiff that he was being recruited to convert TMRC to a medical treatment model. Dr. Talbott also stated that he was the medical director and made all final decisions regarding clinical matters. In his discussions with plaintiff, Dr. Talbott generally indicated that he bore the responsibility for making the change at TMRC. In April of 1995, after plaintiff had already signed the employment contract, plaintiff visited Atlanta again, at which time Dr. Talbott reaffirmed his desire to change over to a medical model of treatment. According to plaintiff's spouse, who accompanied plaintiff, it was very clear that Dr. Talbott wanted the changes to be made at TMRC. In reliance upon his conversations with Dr. Talbott, plaintiff sold his house in Kansas, bought a house in Georgia, and otherwise prepared to begin his employment at TMRC. In 1994 and 1995, Dr. Richard Irons began to work to implement the change in treatment models, but he met with resistance at TMRC. Dr. Irons testified as follows: 797 Dr. Talbott's vision of change went along until approximately this time period, when suddenly Mr. Underwood became directly involved in the process and indicated that at a notable meeting that we would only, as he referred to it, tweak the system in terms of change. We were not going to make substantive changes. That what had worked in the past had been successful from a business standpoint, and we would only tweak the system. We would not make additional changes. Dr. Irons testified that the "notable meeting" took place "[p]erhaps four or five months after September of '94." Nevertheless, during the course of defendant's recruitment of plaintiff, Dr. Irons trusted Dr. Talbott to effect the changes at TMRC. In answer to a question about his responsibility at TMRC for determining the treatment program that would be used, Mr. Underwood testified as follows: Well, I think fundamentally mine would only apply if something was presented that appeared to be certainly way out of what is considered customary in our work and it was brought to my attention perhaps by other parties who had the credentials to do so. I think I would exert some prerogative in that say-so. Otherwise I rely totally on Dr. Talbott, Dr. Wilson, the other clinicians, as well as [Dr. Gropper] as a clinician. On June 26, 1995, Mr. Underwood reaffirmed to Dr. Irons that TMRC would not change its treatment model. Mr. Underwood told plaintiff the same thing the following day. Later on June 27, plaintiff spoke with Dr. Talbott. Plaintiff described that conversation as follows: He said, well, I don't know if I can make a medical model. And I said, well, what is going on? He said, well, the way it is set up right now, Underwood and Gropper run the business. And I said, what do you mean they run the business? He said, they have all control of all the moneys. And I said, I don't even know what you are talking about. He said, I can't make the changes that I have talked about. I just cannot make the changes. And I said, Doug, I have a house in Atlanta and you are telling me to come down to negotiate contracts. What is going on? And he said that there would be a continuation of the model as it has always been. And he said, I can't make any changes. I just am not that powerful. I said, but you did at Ridgeview. You left Ridgeview and you did just fine. You took Underwood and all of those guys and you brought them over to TMRC and have done really, really well. What do you mean you can't make changes? And he said, I don't think I am powerful enough. I don't have that kind of power. On June 29, Dr. Talbott again spoke with plaintiff, stating as follows: I was thinking about your phone call and when you called me you asked me not to subject you to, as you termed it, the shit that [Dr. Irons] went through, and not to have you come to Atlanta unless I was prepared and guaranteed sort of a new treatment model, as you said you wanted to fire Underwood and fire Gropper and for us to have physicians take over completely, and Mike, in thinking about that I don't really have the desire or the authority to do that, and I really have to respond to your request in telling you that I don't think you ought to come to Atlanta. Plaintiff agreed, and defendant subsequently withdrew plaintiff's employment contract. This litigation followed. II. Summary Judgment When considering a motion for summary judgment, the court must examine all of the evidence in the light most favorable to the nonmoving party. Jones v. Unisys Corp., 54 F.3d 624, 628 (10th Cir.1995). A moving party that also bears the burden of proof at trial is entitled to summary judgment only when the evidence indicates that no genuine issue of material fact exists. Fed.R.Civ.P. 56(c); Anglemyer v. Hamilton County 798 Hosp., 58 F.3d 533, 536 (10th Cir.1995). If the moving party does not bear the burden of proof at trial, it must show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 2554, 91 L. Ed. 2d 265 (1986). Once the movant meets these requirements, the burden shifts to the party resisting the motion to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202 (1986). The nonmovant may not merely rest on the pleadings to meet this burden. Id. Genuine factual issues must exist that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. at 2511. Summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327, 106 S.Ct. at 2555 (quoting Fed. R.Civ.P. 1). III. Choice of Law The court concludes that Kansas law governs plaintiff's misrepresentation claims. The court applies Kansas's choice of law rules here. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021-22, 85 L. Ed. 1477 (1941). In Kansas, tort actions are governed by the law of the state where the tort occurred, that is, the state where the wrong was felt. Ling v. Jan's Liquors, 237 Kan. 629, 634-35, 703 P.2d 731 (1985). Because plaintiff alleges financial injury in this case, he felt the wrong in Kansas, where he is a resident. Therefore, the court applies Kansas law here. See Steele v. Ellis, 961 F. Supp. 1458, 1463 (D.Kan.1997) (Van Bebber, J.) (fraud claim governed by law of state of plaintiff's residence); Maberry v. Said, 911 F. Supp. 1393, 1399 (D.Kan.1995) (same); Atchison Casting Corp. v. Dofasco, Inc., 889 F. Supp. 1445, 1456 (D.Kan.1995) (same). IV. Fraudulent Misrepresentation In his brief in opposition to summary judgment, plaintiff alleges two misrepresentations by Douglas Talbott: (1) "Talbott misrepresented a future occurrence the transfer of control of treatment away from Gropper and into the hands of licensed physicians and psychiatrists ... (i.e., the shift from a `social model' to a medical model');" and (2) "Talbott misrepresented an existing fact: he, and only he, had the power to change treatment modalities at TMRC." Plaintiff asserts a fraudulent misrepresentation claim with respect to each alleged misrepresentation by Dr. Talbott. The Kansas Supreme Court has recently stated the elements of the tort of fraudulent misrepresentation under Kansas law: Actionable fraud includes an untrue statement of fact, known to be untrue by the party making it, which is made with the intent to deceive or recklessly made with disregard for the truth, where another party justifiably relies on the statement and acts to his or her injury and damage. Gerhardt v. Harris, 261 Kan. 1007, 1013, 934 P.2d 976 (1997). Fraud must be proven by clear and convincing evidence. T.S.I. Holdings, Inc. v. Jenkins, 260 Kan. 703, 727, 924 P.2d 1239 (1996). A. Change in the Treatment Model Plaintiff first alleges that Dr. Talbott fraudulently promised him that defendant would change its treatment model. Defendant argues that it is entitled to summary judgment on this claim because plaintiff has not met his burden of producing evidence that Dr. Talbott made such a representation. The court agrees. In his statement of facts, plaintiff relates Dr. Talbott's "vision" for a different system of treatment and his general desire to make a change. Plaintiff further relates Dr. Talbott's discussions with him regarding that vision and desire. Plaintiff does not state, however, that Dr. Talbott promised him that defendant would change its treatment models, and plaintiff's citations to the record in support of his allegation do not reveal evidence that any such representation was ever made. 799 For instance, in paragraph 26 of his statement of facts, plaintiff states that Dr. Talbott represented to him "that TMRC was recruiting him to convert TMRC to a medical treatment model." In paragraph 27, plaintiff states that Dr. Talbott represented to him that plaintiff "was ideal, exactly what he had been looking for, to lead them into the vision." Paragraph 24 states that Dr. Talbott, as the new national president of an addiction medicine society, "wanted to change TMRC's model to a legitimate, efficacious medical model." The evidence provided by plaintiff amply demonstrates that Dr. Talbott expressed to plaintiff the need for a change and his desire to make such a change, but plaintiff has not provided evidence that Dr. Talbott promised plaintiff that such a change would definitely take place. Summary judgment is also appropriate on this claim because plaintiff has failed to provide evidence to satisfy the requirements of present intent and knowledge. The alleged misrepresentation by Dr. Talbott that defendant would change its treatment model relates to a future act. To be actionable, a misrepresentation must relate to a pre-existing or present fact; statements or promises about future occurrences are not actionable. An exception exists where evidence establishes that, at the time the promise as to future events was made, the promisor did not intend to perform the promised action. Flight Concepts Ltd. Partnership v. Boeing Co., 38 F.3d 1152, 1157 (10th Cir.1994) (citation omitted) (citing Edwards v. Phillips Petroleum Co., 187 Kan. 656, 659-60, 360 P.2d 23 (1961)); see also Gerhardt, 261 Kan. at 1013, 934 P.2d 976 ("When the alleged fraud relates to promises or statements concerning future events, the gravamen of such a claim is not the breach of the agreement to perform, but the fraudulent misrepresentation concerning a present, existing intention to perform, when no such intention existed."). To succeed on this claim therefore, plaintiff must show that Dr. Talbott knew and intended at the time of the alleged representation that defendant would not in fact change treatment models. Plaintiff has not satisfied his burden with respect to this issue. Plaintiff relies heavily on the testimony by Dr. Irons concerning Mr. Underwood's statement in early 1995 that defendant would not make substantive changes but would only tweak the treatment system. Plaintiff argues that defendant therefore knew at the time of the alleged promise that it would not be changing treatment models. This testimony by Dr. Irons does not help plaintiff, however. What is relevant here is not the knowledge or intent of another of defendant's employees, but that of Dr. Talbott, the alleged promisor. See Flight Concepts, 38 F.3d at 1157. Plaintiff has provided no evidence giving rise to a reasonable inference that Dr. Talbott had a present intent not to perform. The fact that defendant did not in fact change its treatment model is not sufficient to establish the requisite intent. "Where a claim of fraud is predicated on a promise or statement concerning future events, there must be more than mere nonperformance to show fraudulent intent." Whitten v. Farmland Indus., Inc., 759 F. Supp. 1522, 1542 (D.Kan.1991) (citing Modern Air Conditioning, Inc. v. Cinderella Homes, Inc., 226 Kan. 70, 78, 596 P.2d 816 (1979)); accord Eckholt v. American Business Information, Inc., 873 F. Supp. 526, 532 (D.Kan.1994); Young v. Hecht, 3 Kan. App. 2d 510, 515, 597 P.2d 682 (1979); Restatement (Second) of Torts § 530 cmt. d (1977). "Other circumstances of a substantial character must exist which would support an inference of wrongful intent at the time of making the representation." Young, 3 Kan.App.2d at 515, 597 P.2d 682. No such other substantial circumstances exist here to show an intent to deceive by Dr. Talbott. For example, plaintiff has not pointed to any evidence that Dr. Talbott attended the meeting at which Mr. Underwood declared that no major change would be made or otherwise had knowledge of that declaration. Nor has plaintiff cited any evidence that such meeting took place before the alleged representation to plaintiff, which apparently occurred in January of 1995 when plaintiff visited TMRC. Moreover, plaintiff has not shown any potential benefit known to defendant 800 at the time of its negotiations with plaintiff that would accrue from the making of the alleged promise and its subsequent failure to perform, such as would justify an inference of a present intent not to perform. See Young, 3 Kan.App.2d at 515, 597 P.2d 682. In fact, plaintiff's own evidence indicates that Dr. Talbott did still want and intend to make the change at TMRC. In paragraph 24 of his statement of facts, plaintiff states that in the Spring of 1995, as the new president of the national organization, Dr. Talbott "wanted" to change defendant's model. Plaintiff's wife testified that, at a meeting after plaintiff had already signed the employment contract, "it was very clear Dr. Talbott wanted these changes to be made." Plaintiff points to evidence that Dr. Irons met with resistance in trying to implement a change in the treatment model, but Dr. Irons testified that during the course of defendant's interviewing and negotiating with plaintiff, he trusted Dr. Talbott to have the changes made. See Flight Concepts Ltd. Partnership v. Boeing Co., 819 F. Supp. 1535, 1549 (D.Kan.1993) (no evidence of present intent not to perform promise to market an aircraft where defendant was in fact enthusiastic about the project and had a desire to see it succeed), aff'd, 38 F.3d 1152 (10th Cir.1994). The court thus concludes that defendant is entitled to summary judgment on this claim of fraudulent misrepresentation because plaintiff has not provided evidence that Dr. Talbott knew that the alleged representation was false or that he intended to deceive plaintiff thereby. See Whitten, 759 F.Supp. at 1542 (summary judgment appropriate where, even if representations were made, were false, and were justifiably relied upon, there was no evidence of the declarants' knowledge of their falsity or wrongful intent). B. Authority to Change the Model Plaintiff also alleges that Dr. Talbott fraudulently misrepresented that he had the authority to change defendant's treatment model if he so chose. Defendant contends that Dr. Talbott made no such representation. It is true that plaintiff has not provided evidence that Dr. Talbott expressly and exactly represented that he had the authority to change the treatment model. There is evidence, however, that Dr. Talbott told plaintiff that he was the medical director and made all final decisions regarding clinical matters. Moreover, the evidence relating Dr. Talbott's discussions with plaintiff reveals that Dr. Talbott generally indicated to plaintiff that the responsibility for implementing the desired change lay with Dr. Talbott. The court therefore concludes that plaintiff has provided sufficient evidence that Dr. Talbott, in essence, represented that he had the requisite authority to effect the change in treatment model. Defendant next argues that any such representation was not false. In response, plaintiff contends that Mr. Underwood testified that he in fact controlled decisions regarding the treatment model. Plaintiff mischaracterizes the relevant testimony, however. As set out above, Mr. Underwood testified that he generally did not bear any responsibility concerning the treatment model decision and deferred to Dr. Talbott and the clinicians, but would only intercede in the event of an aberrant decision. This testimony does not raise the inference that Dr. Talbott did not have the authority he allegedly asserted. Nevertheless, defendant is not entitled to summary judgment on this basis. Plaintiff also cites to his own deposition testimony about Dr. Talbott's conversation with him at the time the parties went their separate ways. According to plaintiff, Dr. Talbott stated that Mr. Underwood and Dr. Gropper ran the business and that he did not have the power to make the changes. Such testimony, when viewed in the light most favorable to plaintiff, is sufficient to raise a reasonable inference that Dr. Talbott did not in fact possess the authority to change defendant's treatment model and that any representation to the contrary was false. The court does conclude, however, that plaintiff has not satisfied his burden to produce evidence that Dr. Talbott knew of the falsity of the alleged representation or that he had the requisite intent to deceive. Plaintiff relies on Dr. Underwood's testimony about his role in the decision-making, but, 801 again, that testimony actually supports the position that Dr. Talbott did have the authority. In fact, as with the other alleged misrepresentation here, the evidence provided by plaintiff on the whole indicates that Dr. Talbott believed that he did have the authority regarding the treatment models. See Hein v. Techamerica Group, Inc., 1992 WL 221549, at 4 (D.Kan. Aug.24, 1992). Plaintiff also argues that Mr. Underwood had already rejected Dr. Talbott's vision, but, as explained above, there is no evidence that Dr. Talbott knew that fact or that such rejection preceded Dr. Talbott's alleged representations about his authority. Plaintiff can only point to Dr. Talbott's eventual admission of his lack of authority, but such evidence is not sufficient to imply that Dr. Talbott knew that fact months before or that he intended to deceive plaintiff on that score. The court notes that summary judgment in favor of defendant does not require a determination of Dr. Talbott's state of mind at the relevant time; "[r]ather, the court's task is to determine whether the nonmoving party has presented clear and convincing evidence upon which the jury could make such a determination." All West Pet Supply Co. v. Hill's Pet Prods. Div., 840 F. Supp. 1426, 1432 (D.Kan.1993). Plaintiff has not provided clear and convincing evidence here that Dr. Talbott acted with an intent to deceive plaintiff about his authority. Accordingly, the court grants summary judgment in favor of defendant on this claim of fraudulent misrepresentation. V. Negligent misrepresentation Plaintiff also brings claims of negligent misrepresentation based on the two representations discussed above. The Kansas Supreme Court has recognized a cause of action for negligent misrepresentation. Mahler v. Keenan Real Estate, Inc., 255 Kan. 593, 605, 876 P.2d 609 (1994). The court expressly adopted Restatement section 552, which provides: One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Id. at 604, 876 P.2d 609 (quoting Restatement (Second) of Torts § 552(1) (1977)). Thus, the elements of negligent misrepresentation differ from those of fraud only with respect to the standard by which the defendant is charged with knowledge of the representation's falsity. See id. A. Change in the Treatment Model The court concluded above that plaintiff had not provided evidence that Dr. Talbott actually promised plaintiff that defendant would change its treatment model. That conclusion also dooms the corresponding negligent misrepresentation claim, and summary judgment is appropriate. Moreover, a negligent misrepresentation cause of action is not appropriate here because the alleged misrepresentation involved a future event. Dr. Talbott cannot have negligently stated an intention to make a change in the treatment model in the future; he either had such intent or he didn't, and thus fraudulent misrepresentation is the only applicable theory of recovery. This court addressed the same question in Hippen v. First National Bank, 1992 WL 73554 (D.Kan. Mar.19, 1992), concluding that the "[p]laintiffs cannot sustain a claim that defendants `negligently' entered into an oral promise they did not intend to keep." Id. at 5. The same conclusion was reached in Eckholt, in which the court stated: Eckholt's claim is that defendants were negligent in representing their then-current intent to employ him pursuant to the terms of the employment agreements.... [I]t appears to the Court that defendants either intended to carry out their promises, or they did not. To recognize a claim for negligent promise, on this record, would be to endow every breach of contract with a potential tort claim for negligent promise. The Seventh Circuit recently noted as much in a similar situation: 802 "... if one making representations had a present intention not to perform them, the aggrieved party's claim would properly and logically be one for intentional misrepresentation ... not one based on negligence." 873 F.Supp. at 532 (quoting Badger Pharmacal, Inc. v. Colgate-Palmolive Co., 1 F.3d 621, 628 n. 7 (7th Cir.1993)); see also O'Bryan v. Wendy's Old Fashion Hamburgers of New York, Inc., 1997 WL 158296, at *7 (D.Kan. Mar.19, 1997). Similarly here, plaintiff cannot sustain a claim of negligent misrepresentation with respect to any promise by Dr. Talbott regarding a future act. B. Authority to Change the Model The court concludes that plaintiff has provided evidence supporting his claim of negligent misrepresentation based on Dr. Talbott's alleged representation that he had the authority to change defendant's treatment model sufficient to withstand summary judgment. As stated above, questions of fact remain concerning whether the alleged representation was made and whether such representation was actually false. Furthermore, plaintiff's failure to provide evidence that Dr. Talbott knew of the statement's falsity or intended to deceive plaintiff is not relevant to this claim. The court concludes that a jury could reasonably believe that Dr. Talbott failed to exercise reasonable care in knowing whether his statement was true and in communicating that information to plaintiff. The fact that Dr. Talbott was defendant's president raises a reasonable inference that Dr. Talbott should have known the scope of his own decision-making authority, and a jury could reasonably find that if Dr. Talbott misrepresented that he had authority he did not in fact have, he acted negligently. Thus, an issue of fact remains. Defendant argues that the misrepresentation here "is only relevant when tied directly with that of a future occurrence the alleged change from a social to a medical model." Defendant does not cite any authority in support of that proposition, however. The court is unwilling to conclude as a matter of law that plaintiff may not pursue this claim in the absence of an actionable misrepresentation that defendant would in fact change treatment models. The claim's relation to Dr. Talbott's stated desire to make the change and his recruitment of plaintiff to further that purpose is sufficient to raise an inference that plaintiff suffered damages from his reliance on the alleged misrepresentation about Dr. Talbott's authority. VI. Punitive Damages Defendant also seeks summary judgment on plaintiff's claim for punitive damages under Kansas law. After plaintiff dismissed his retaliatory discharge and defamation claims, he based his claim for punitive damages only on his fraudulent misrepresentation claims. Because the court has granted summary judgment on those claims, plaintiff is not entitled to recover punitive damages. Accordingly, the court grants summary judgment on plaintiff's claim for punitive damages. IT IS THEREFORE ORDERED BY THE COURT THAT defendant's motion for partial summary judgment (Doc. 71) is granted in part and denied in part. The motion is granted with respect to plaintiff's fraudulent misrepresentation claims, his claim for punitive damages, and his negligent misrepresentation claim based on a representation that defendant would change treatment models; those claims are hereby dismissed. The motion is denied with respect to plaintiff's negligent misrepresentation claim based on Dr. Talbott's alleged representation that he had the authority to make the change in treatment models, which claim survives to trial. IT IS FURTHER ORDERED BY THE COURT THAT plaintiff's retaliatory discharge and defamation claims are hereby dismissed with prejudice. IT IS SO ORDERED. NOTES [1] In accordance with the applicable summary judgment standard, these facts are uncontroverted or related in the light most favorable to plaintiff.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2124254/	472 F. Supp. 149 (1979) Gerald Francis BRENNAN, Petitioner, v. W. D. BLANKENSHIP, Superintendent of the Bland Correctional Center and Marshall Coleman, Attorney General, Commonwealth of Virginia, Respondents. Civ. A. No. 78-0037(R). United States District Court, W. D. Virginia. February 23, 1979. 150 Jeffrey Krasnow, Roanoke, Va., for petitioner. Robert Herring, Asst. Atty. Gen., Richmond, Va., for respondents. OPINION TURK, Chief Judge. Gerald Francis Brennan seeks habeas corpus relief under 28 U.S.C. §§ 2241 and 2254. Petitioner was convicted of two counts of malicious wounding in the Circuit Court for the County of Montgomery. He was sentenced to two thirteen year terms of imprisonment, to run consecutively. He now contends that these convictions are constitutionally infirm because of ineffective assistance of counsel. Brennan has previously asserted the identical claim in a habeas proceeding conducted in the Montgomery County Circuit Court. His petition was denied and this ruling was upheld on appeal to the Virginia Supreme Court. All parties acknowledge that full exhaustion of the Sixth Amendment claim has occurred. See 28 U.S.C. § 2254(b) and (c). Consequently, the court proceeds to consideration of petitioner's claim on its merits. FACTUAL BACKGROUND Stated briefly, petitioner contends that defense counsel failed to properly investigate and communicate the possibility of a defense of insanity. Brennan was charged with the malicious wounding of George B. Hall and George B. Hall, Jr. The Hall family were neighbors of the Brennans. The relationship of the two families had been harmonious until early 1973 when a dispute arose over an access road utilized by Hall, Sr. which crossed land owned by Brennan's wife. On April 9, 1973, Brennan received a letter from the Halls' attorney offering to buy the property in question and threatening legal action if the sale was not effected. Brennan mulled over the letter, consulted with his attorney, and did some chores. Sometime thereafter, Brennan returned to his home, reread the letter, and fell into a rage. He armed himself with two revolvers and a substantial quantity of ammunition. He then got into his vehicle and proceeded to drive down his private driveway to the state highway. Upon reaching the highway, Brennan spotted a vehicle driven by Hall, Sr. and occupied by Hall, Jr. Brennan proceeded to ram the Hall vehicle off the road. Petitioner then exited his car and shot Hall, Sr. five times and Hall, Jr. four times. Brennan then returned to his home where he called the County Sheriff to report the incident. Brennan was arrested and taken to jail. He called his family attorney, Bentley Hite. Hite agreed to represent Brennan though Brennan and Hite later determined to hire J. L. Dillow, Esq. as co-counsel. On April 10, 1973, Hite and Brennan appeared in General District Court for preliminary proceedings. Brennan was sent to Southwestern State Hospital in Marion for an evaluation of his mental capacity. A report was issued by a Dr. Zygmunt Wegielski of that hospital on May 18, 1973, stating that Brennan had not been found to be psychotic, and that he was competent to stand trial. Upon his return from Southwestern State, petitioner was released on bond. His attorneys arranged for him to be examined by two more psychiatrists. The first, a Dr. Hurt, concluded that Brennan was mentally competent. The second, a Dr. Morgan Scott, conducted a preliminary examination and admitted petitioner to St. Albans Hospital in Radford on November 23, 1973. Brennan had been scheduled to be tried on December 7, 1973. His attorneys later admitted that they had not been prepared for trial on that day. Instead, 151 they appeared before Circuit Court Judge Southall Jordan and moved for a continuance on the ground that Brennan was mentally incompetent to assist in his own defense. In support of the motion, Hite and Dillow presented the testimony of Dr. Scott. Dr. Scott noted that Brennan was not competent to assist in a defense. More importantly, Dr. Scott opined that Brennan was psychotic on the day of the shooting and was not aware of what he was doing. Dr. Scott related that Brennan's controlled paranoid schizophrenic condition could become manifest under stress. Accordingly, the doctor opined that Brennan might provide further danger to the Halls if he were to remain free on bond. Judge Jordan granted the continuance, suspended the bond, and ordered Brennan confined in the maximum security area at St. Albans under the care of Dr. Scott. Thereafter, a belabored and often heated series of letters and communications were exchanged between Mr. and Mrs. Brennan and the two defense counsel. Brennan soon became dissatisfied with the restrictions imposed at St. Albans and sought transfer to another facility. At Brennan's behest, Attorney Dillow arranged for the petitioner to be returned to Southwestern State. As evidenced by a letter from Dillow to Mrs. Brennan dated January 9, 1974, petitioner had apparently expressed some reservations as to the treatment at St. Albans and his interaction with Dr. Scott.[1] Dillow's response was to the effect that Dr. Scott is a highly competent and respected professional. In a follow-up letter to Dillow dated January 11, 1974, Brennan related that his primary concern was not for Dr. Scott's competence but rather for the fact that Dr. Scott insisted that he (Brennan) remain in maximum security. At that point, Brennan also expressed some question as to the sufficiency of the efforts of Attorney Hite. As regarded the question of alternate trial strategies, Brennan communicated his desire to avoid any approach which might lead to a determination of continuing insanity. However, he clearly indicated that he wished to pursue any advantage that might be obtained from a determination of temporary insanity. Finally, in the letter of January 11, 1974, Brennan indicated that he wished to secure release on bond. In a letter to Brennan dated January 30, 1974, Attorney Dillow indicated that he was investigating the extenuating circumstances of the case for the purpose of possibly establishing that petitioner was "in such condition at the time of the alleged offenses that [petitioner was] incapable of realizing the consequences of [his] acts and maybe thereby remove malice from the case." At least at that time, Dillow made no further mention of the possibility of interposing a legal defense of insanity. Dillow suggested further medical evaluation in an effort to "overcome the inference of malice." Dillow also discussed the question of Attorney Hite's continuing participation in the defense. Brennan also wrote Dillow on January 30, 1974 and indicated that he wished Hite to continue in the case. Brennan related that doctors at Southwestern State had told him a finding of not guilty by insanity might result in incarceration at a mental facility for many years. Brennan requested information on the possibility of pleading guilty to a charge of "wounding without malicious intent." Dillow responded by letter of February 8, 1974. While Dillow discussed the upcoming trial date of April 9, he did not undertake to mention the possibility or legal ramifications of a plea of insanity. Brennan continued to press for a release on bond pending trial. In this regard, Brennan noted in a letter to Dillow dated February 12, 1974 that the reports of the doctors at Southwestern State might prove favorable. Recognizing that such an attempt might cause the credibility of Dr. Scott's earlier testimony to be questioned, Brennan suggested that Dillow consult with the doctor. He specifically stated that "[b]efore I shut the door on Dr. Scott, however, I do not want to hamper or hinder your efforts." Brennan did relate that he wanted to seek release on bail, 152 sparing no legal avenue. In a letter to Dillow dated February 22, 1974, Brennan complained of the lawyer's inactivity on the bail motion. On February 27, 1974, Dillow and Hite appeared before Circuit Judge Jordan seeking Brennan's release on bond. Dillow submitted a letter from Dr. Wegielski from Southwestern State in which the doctor stated that the chances were "slim" that Brennan would prove dangerous if released. After the prosecution restated Dr. Scott's earlier findings, Judge Jordan denied the bond request, noting that defendant should not be allowed to rely on different doctors' reports in order to serve different tactical purposes. Judge Jordan ordered Brennan returned to St. Albans for further examination by Dr. Scott whose opinion, the judge said, would serve as dispositive of the bond question. Dillow reported the results of the hearing to Brennan by letter dated March 4, 1974. Dillow also noted that he and Judge Jordan had "worked out the plan" whereby Brennan was to be brought to the Montgomery County Jail rather than St. Albans, still with the expectation of examination by Dr. Scott. On March 26, 1974, Brennan sent Dillow an eighteen page autobiography which was apparently intended to assist counsel in the development of a defense and/or evidence in mitigation. At the end of his self-analysis, Brennan wrote as follows: "Considering the above record, it seems incredible that Jerry Brennan could have been involved in a conflict that would result in a shooting. Those who sit in judgment of this man must search their minds and hearts to answer the question: Why did this tragedy occur? . . . "I, Jerry Brennan, confided some of my troubles to my wife and friends, but I was nevertheless approaching a nervous breakdown brought on primarily by the conditions I encountered on returning from Guam on July 1, 1972, . . . I was simply unable to cope with the repudiation of friendship displayed by George Hall . . .. "In retrospect I can see now that I simply permitted these antagonisms to eat me alive, to destroy my sense of balance. I found myself in a situation which appeared to have no logical or final solution. In a world which for several years now has seemed falling apart, with a breakdown of our traditional values and standards, I was a casualty of that breakdown myself. In attempting to resolve my problem I acted irrationally. In a moment of rage, life was suddenly meaningless and I was prepared to sacrifice myself for principle." On March 28, 1974, Dillow again wrote Brennan. No mention was made of securing further opinion from Dr. Scott and, indeed, no supplemental examination occurred prior to trial. Instead, Dillow recommended that the shootings of the father and son be severed for purposes of trial. Dillow also discussed trial tactics such as strict jury panel scrutiny, character witnesses, pros and cons of Brennan testifying, change of venue, and rebuttal of an inference of malice. No mention was made of an insanity plea. Dillow related that his opinions as to case presentation would give way to any better opinions expressed by Brennan or Hite. Dillow sent additional letters on April 2 and 3. The attorney related that he was having difficulty locating character witnesses. Dillow summarized the possible jury verdicts. He related that he could discern no defense that a jury would likely accept. While he stated that he understood that Brennan was upset on the day of the shooting, Dillow opined that it would be difficult if not impossible to convince a jury that Brennan was guilty of anything less than malicious wounding. Dillow suggested plea bargaining. Brennan was tried on April 8 and 9 on charges of malicious wounding of George Hall, Sr. No evidence of insanity was offered. The defense consisted of Brennan's testimony, and that of his wife, daughter, and six character witnesses. In closing arguments for the defendant, Attorney Hite argued that at the time of the shooting, Brennan "lost his temper completely, became irrational, and did something that none of us would do if we were in our right 153 mind." He also suggested to the jury that Brennan had been "beside himself" and that "he didn't know what he was doing at times." However, the court gave an instruction to the effect that since insanity had not been raised as a defense, there existed an unrebutted presumption of sanity and legal responsibility for acts done. The instruction was given over objection of the defense. The jury found Brennan guilty of malicious wounding and sentenced defendant to thirteen years incarceration. A series of letters were thereafter exchanged between Dillow and Brennan regarding strategy for the trial on malicious wounding of Hall, Jr. On June 5, 1974, Brennan wrote Dillow that since the evidence in the first trial suggested that the victims suffered powder burns and since he [Brennan] could not remember firing at less than ten feet, "I would be forced to conclude that a brief period of irrationality did exist, and therefore possibly a plea of temporary insanity should be considered." He further stated that "I want the truth to come out, whatever it may be or wherever it may lead." Brennan also indicated a desire to appeal his first conviction. While defense counsel had sketched out a rough draft of a petition of appeal, no appeal was ever perfected. On June 22, 1974, Mrs. Brennan wrote a critical letter to Dillow questioning the efforts of defense counsel. One of her specific questions concerned the possibility of obtaining further medical and psychiatric evaluations, "either to confirm or to question Dr. Scott's sworn testimony." The second trial was scheduled for July 26, 1974. Eventually, a bargain was reached whereby Brennan would plead guilty to malicious wounding of Hall, Jr. in exchange for a recommendation of a second thirteen year sentence to run consecutively with the first. On the day set for trial, Brennan so pled, admitting that the plea was made freely, voluntarily, without pressure, and with full understanding of the ramifications. He stated that he was satisfied with the representation of Hite and Dillow. Sentence was rendered consistent with the agreement. An interesting series of events occurred in mid 1976 which shed further light on the factual controversy in the instant matter. The Halls made known their intent to claim civil damages arising out of the shooting episode. Brennan's homeowners insurance carrier attempted to secure a declaratory judgment to the effect that it could not be held responsible for any damage award since damages arising out of intentional acts were expressly excluded from the policy's liability coverage. The crux of the insurance carrier's argument was that the adjudication of the questions of Brennan's sanity were barred under the doctrine of res judicata, given the outcome of the criminal proceedings. The matter was heard by Circuit Judge Jordan who had presided in both criminal proceedings. The Halls were represented by the same attorney who had served as special prosecutor in the criminal proceedings. The Halls argued that Brennan had been at least temporarily incapacitated at the time of the shootings and that his acts could not be deemed to have been intentional. In an agreed statement of the facts adduced at an evidentiary hearing, Dr. Morgan Scott was said to have testified as described in the following statement: "In his testimony . . . Dr. Scott testified that in his medical opinion Brennan was a latent schizophrenic and that the letter from the attorney of . . . Hall, Sr., had activated this schizophrenia to the point to which Brennan was unable to control himself and could not realize the consequences of his act. He furthermore testified that in his opinion Brennan was not mentally competent at the time of the shooting. Counsel for the [Halls] asked the doctor whether he thought that Brennan had the mental capacity at the time of the shooting to foresee its consequences. Dr. Scott in response to this question replied that it was his opinion that Brennan did not have such mental capacity. However, Dr. Scott also testified that his examination of the Defendant Brennan took place some time after the assaults upon the [Halls]." In a short order and decree, Judge Jordan ruled that the insurance carrier was responsible 154 for any civil damages to which the Halls might be found entitled.[2] Dr. Morgan Scott also testified at a hearing conducted by the Montgomery County Circuit Court on Brennan's petition for state habeas relief. At that hearing, Dr. Scott restated his previously described diagnosis. The doctor further testified that in his opinion, Brennan, on the day of the shootings, did not realize the consequences of his actions, did not know that his actions were wrong, did not have the capacity to distinguish between right and wrong, and did not possess a will sufficient to restrain the impulse that arose. Dr. Scott also stated that after testifying on December 7, 1973, he had prepared to testify at trial but was never again contacted by either Dillow or Hite. The state habeas proceedings eventually resulted in a denial of relief. Throughout the state habeas proceedings and in hearings conducted before this court. Attorneys Dillow and Hite maintained that they felt that there was insufficient evidence for a viable insanity defense and, even had such evidence been available, they abandoned such a tactic given their perception of Brennan's adamant protestations against any strategy which might have led to a prolonged mental commitment and stigma. APPLICABLE LEGAL STANDARDS There is only one major issue involved in this case: whether petitioner's attorneys afforded him ineffective assistance through their failure to more fully investigate and/or develop a defense of insanity to the charges of malicious wounding. More specifically, it must be determined whether petitioner's defense was constitutionally prejudiced through the failure of his attorneys to follow-up on any possible advantage that might have been obtained by further participation of Dr. Scott in petitioner's case. There is a second, threshold issue which is of little moment and need not long detain the court. The state habeas proceedings resulted in a finding of constitutionally acceptable assistance of counsel. Normally, such a factual determination after a hearing on the merits will not be disturbed, in the absence of special circumstances, unless a petitioner establishes by convincing evidence that the state determination was erroneous. 28 U.S.C. § 2254(d). However, this rule does not bar a reassessment of factual issues when the state court utilized an improper legal standard in making its factual determination, even where the proper legal standard had not yet been announced at the time of the state court's findings. U. S. ex rel. Williams v. LaVallee, 487 F.2d 1006 (2nd Cir., 1973), cert. den. 416 U.S. 916, 94 S. Ct. 1622, 40 L. Ed. 2d 118 (1974). In the instant case, the state habeas court rendered its decision on May 18, 1977. The court measured the effectiveness of the assistance of counsel under the "farce and mockery" standard of Hoffler v. Peyton, 207 Va. 302, 149 S.E.2d 893 (1966). This test was specifically rejected by the United States Court of Appeals for the Fourth Circuit on September 2, 1977 in Marzullo v. Maryland, 561 F.2d 540 (4th Cir., 1977), cert. den. 435 U.S. 1011, 98 S. Ct. 1885, 56 L. Ed. 2d 394 (1978). Marzullo requires representation by an attorney in a specific case to be measured against the level of competence generally demanded of attorneys in criminal cases. It has been suggested that the standards of Marzullo should not be applied retroactively. However, while the court is unaware of any decision specifically holding Marzullo to be retroactive, the "normal level of competence" test has been applied by the Fourth Circuit in numerous cases involving representation afforded by defense attorneys prior to the announcement of Marzullo. Fuller v. Luther, 575 F.2d 1098, 1101 (4th Cir., 1978), Proffitt v. U. S., 582 F.2d 854 (4th Cir., 1978), reh. and reh. en banc den.; Springer v. Collins, 586 F.2d 329 (4th Cir., 1978). Indeed, Marzullo borrowed heavily from McMann v. Richardson, 397 155 U.S. 759, 90 S. Ct. 1441, 25 L. Ed. 2d 763 (1970) and was obviously foreshadowed by Coles v. Peyton, 389 F.2d 224 (4th Cir., 1968). See Marzullo, supra at 543. The court is of the opinion that the Marzullo standard must be applied in the instant case. In attempting to make the relevant evaluation, the court may determine the "normal level of competence" by reference to such sources as case precedent, state bar canons, American Bar Association Standards Relating to the Defense Function, and, in some instances, expert testimony. Marzullo, supra at 544. The court proceeds with the understanding that it is not enough that defense counsel may have committed error or made a poor choice among several strategical alternatives. Rather, a petitioner must generally establish "that his counsel's error was so flagrant that a court can conclude that it resulted from neglect or ignorance rather than from informed, professional deliberation." Marzullo, supra at 544. See also Springer v. Collins, supra at 332. RESOLUTION OF THE INSTANT CASE This court need not and cannot determine whether Gerald Brennan would have prevailed on pleas of insanity.[3] The court need only determine that petitioner received totally ineffective assistance through the failure of defense counsel to fully investigate and affirmatively communicate the possibility and impact of raising such pleas. There can be no doubt that Dr. Scott's opinions were highly relevant. Dillow and Hite knew what his opinions were. The attorneys knew that the presiding judge considered Dr. Scott's opinions to be significant. As to the decision regarding Brennan's pre-trial release on bond, Judge Jordan, in effect, told the attorneys that Dr. Scott's opinions, after further examination, would be considered dispositive. Despite Judge Jordan's direction, Dr. Scott testified that he was never again contacted after December 7, 1973 regarding further examination of petitioner. In the rather bizarre turn of events surrounding the subsequent civil proceedings in 1976, Dr. Scott was called upon to offer testimony in which he described Brennan as not responsible mentally for the shooting incident. Dr. Scott's testimony led to Judge Jordan's civil decree to the effect that Brennan's actions were not intentional. Yet, that some testimony was available to defense counsel for purposes of the criminal proceedings had counsel merely undertaken to pursue what could be seen, even at that time, as the only coherent and viable response to the criminal charges. In short, there is simply no basis for respondents' contention that there was no evidence upon which a plea of insanity could have been premised. Notwithstanding Dr. Scott's availability and diagnosis, Brennan's aforementioned communications to Dillow, especially that of March 26, 1974, should have been sufficient to alert any trained attorney as to the possibility of an insanity defense. When it appears to defense counsel that psychiatric assistance is needed to prepare his client's defense, counsel is under a duty to seek it. Proffitt v. U. S., 582 F.2d 854, 857 (4th Cir., 1978). When proof of the uncertainty of his client's mental condition is known to defense counsel, his failure to adduce it in court renders his representation "ineffective to the point of depriving him of his Constitutional right to counsel." Owsley v. Peyton, 368 F.2d 1002, 1003 (4th Cir., 1966). See also Proffitt v. U. S., supra at 857. While the attorneys attempted at closing arguments in the first trial to inject their own perceptions of Brennan's mental state, they had adduced no evidence in support thereof. It is not remarkable that the trial judge instructed the jury as to presumed legal responsibility for one's actions. He had been left no other alternative. 156 It is no answer for respondents to now assert that Brennan conclusively rejected an insanity defense. Indeed, as to the charge of malicious wounding of Hall, Jr., the record conclusively establishes that he did not rule out such a possibility. More importantly, in such circumstances, it can scarcely be said that defense counsel discharged their professional responsibility by allowing their case to be guided simply by the uninformed wish of their client to avoid a long period of mental commitment. Dr. Scott had told anyone who bothered to ask him that Brennan suffered from latent schizophrenia which was aggravated by stress. Incarceration in a mental hospital pending trial on serious criminal charges could only be perceived as a stressful situation. Under any professional standard, it is improper for counsel to blindly rely on the statement of a criminal client whose reasoning abilities are highly suspect. This circumstance becomes even more cogent when it is realized that when Brennan communicated his desire to avoid a long period of mental commitment, he was acting under impressions received from talking with the staff at Southwestern State and not from his attorneys. There is no indication that Brennan ever understood that the length of commitment after a judgment of acquittal by reason of insanity would be contingent on whether the impairment was transitory and/or remediable. In short, there is no suggestion that defense counsel discussed the impact of the Virginia "safe and sane" statute with the defendant.[4] Given the attorneys' reasonable conclusion that there was no other factual defense or factors in mitigation, it is almost incredible that the attorneys did not press Brennan on the point. While Brennan and the attorneys may have discussed the matter verbally, it is incredible to believe that an informed discussion took place given the total absence of discussion of the applicable law in the voluminous correspondence exchanged prior to trial. Given his admission of mental breakdown and irrationality as evidenced by his letter of March 26, 1974, it is incredible to believe that Brennan intelligently insisted that the "stigma" to be attached to a possible finding of temporary insanity was so significant as to conclusively preclude an insanity defense. In so far as such a consideration is relevant, this court can only conclude that Brennan expected his attorneys to be bound only to the extent of the mandate of Brennan's letter of January 30, 1974: to "ultimately develop the best defense available to me." Under the applicable professional standards, Brennan had every right to expect that this mandate would be fulfilled. The American Bar Association Standards Relating to the Defense Function (tent. draft, 1970) provides in pertinent part as follows: 5.1 Advising the defendant (a) After informing himself fully on the facts and the law, the lawyer should advise the accused with complete candor concerning all aspects of the case, including his candid estimate of the probable outcome. (b) It is unprofessional conduct for a lawyer intentionally to understate or overstate the risks, hazards or prospects of the case to exert undue influence on the accused's decision as to his plea. . . In its comments to this provision, the ABA Advisory Committee stated, at 235, as follows: If the defendant is mentally competent, the decision as to what plea to make belongs ultimately to him; . . . The decision to plead guilty can be an intelligent 157 one only if the defendant has been advised fully as to his rights and as to the probable outcome of his alternative choices. Kercheval v. United States, 274 U.S. 220, 223, 47 S. Ct. 582, 71 L. Ed. 1009 (1927). (Emphasis added). While this court does not adopt the argument that defense counsel had an affirmative duty to enter pleas of insanity notwithstanding defendant's wishes, it is clear that a professional duty was breached through the total failure of defense counsel to develop the potential of Dr. Scott's testimony. Moreover, the extensive written communications between counsel and Brennan strongly suggest that the possibility and ramifications of an insanity defense were not actually discussed. Even if the court was to credit the testimony of counsel to the effect that such verbal discussions did take place, the record establishes that the advice provided by counsel was woefully inadequate. In his letter of January 30, 1974, written the day after a prolonged meeting with Dillow, Brennan stated that the doctors at Marion "were amazed when I related last night you said you had never heard of the `safe and sane' law." After attempting to cite the "safe and sane" provision for Dillow's benefit, Brennan asked "[d]oes this in any way alter your view concerning my plea?" If Brennan did urge against an insanity plea, he did so without an understanding of the applicable law. The situation would not have occurred had defense counsel discharged their professional responsibility. Even if defense counsel had any reason to believe that Brennan rejected insanity pleas despite their advice, counsel still responded improperly. In pertinent part, the ABA Standards Relating to the Defense Function provide as follows: 5.2 Control and Direction of the case. . . . . . (c) If a disagreement on significant matters of tactics or strategy arises between the lawyer and his client, the lawyer should make a record of the circumstances, his advice and reasons, and the conclusion reached. . . . The appropriate commentary to the sub-section goes on to explain that such records may assist in the disposition of post-conviction proceedings and may consist of a letter from the attorney to the client. Given the total absence of such record in this case, and for other reasons stated above, the court must conclude that petitioner did not receive any meaningful advice or information concerning the possibility and ramifications of the legal defense of insanity. As to the remaining index of the "general level of competence" as described in Marzullo, the court notes that Robert Ryder, Esq. testified at the federal habeas hearing as an expert witness. Ryder is currently the Commonwealth's Attorney for the City of Roanoke and possesses much experience in criminal matters. Ryder opined that diligent and competent counsel would have attempted to further develop the potential of Dr. Scott's testimony. Even if an insanity defense was rejected, such development must be viewed as having been essential to an informed and meaningful consultation between attorney and client. SUMMARY AND DISPOSITION This is not a case such as Springer v. Collins, supra in which the possibility of an insanity defense was not known to defense counsel. All trial participants were aware, or should have been aware, of the significance of Dr. Scott's viewpoints. Nor is this a case, such as Springer, in which the opinion of the medical experts could not have influenced the outcome of the criminal proceedings. Finally, this is not the typical ineffective assistance case in which the decision to adopt one of several possible trial strategies can be seen in retrospect to have been ill-advised. As consistently communicated to Brennan by Dillow, there were absolutely no other viable defenses and few, if any, factors in mitigation. This is a case in which counsel totally failed to develop the only conceivable defense. It is a case in which defense counsel failed to properly advise their client as to his legal alternatives and then allowed themselves to be blindly guided by his uninformed direction. Brennan himself was not *158 blameless. He and his wife consistently berated the attorneys they had hired. In insisting that he be removed from St. Albans Hospital prior to trial, Brennan placed his momentary personal convenience over what he had been told were his own best interests. Brennan's letter of March 26, 1974 is phrased more as his attorneys' closing argument than as a tool for the joint formulation of a defense. In response, defense counsel did not engage in a negligent disregard of their client's interest. Dillow answered every letter. He contacted numerous character witnesses. Perhaps predictably, counsel bent over backwards to insure that Brennan's demands for custodial comfort and convenience were met. However, as regards the measure of their professional performance under the standards to which this court is bound, it must be concluded that counsel bent too far. While a client may prove obstinate, it is still the responsibility of defense counsel to pursue all avenues leading to that client's best interests. The court has found that the failure of defense counsel to pursue the possible tactical advantage provided by Dr. Scott's testimony constituted a professional omission of crucial magnitude. The court has found that defense counsel failed to inform petitioner that the legal defense of insanity was the only potentially successful alternative to be pursued. The court has found that defense counsel failed to inform petitioner of the legal ramifications of a successful insanity plea. The court has found that defense counsel allowed themselves to be guided by petitioner's aversion to such a plea when in fact such aversion arose in part from a lack of information which should have been supplied by counsel. Under any and all standards of professional competence known to this court, the court must conclude that the representation provided petitioner in this case fell far below the level of competence normally demanded of attorneys in like situations. It follows that since petitioner has been deprived of effective assistance of counsel as guaranteed under the Sixth and Fourteenth Amendments, the writ of habeas corpus must issue. NOTES [1] This letter and all other letters described herein are entered as exhibits to either the federal habeas record or the state habeas record. [2] The relevant documents from the civil proceeding are entered as exhibits in the federal habeas record. Judge Jordan's decision was appealed to the Virginia Supreme Court. [3] There is no doubt that, under Virginia law, a defendant competent to stand trial may still raise an insanity defense as to past criminal acts. See, Gen., 10A Michie's Jurisprudence Virginia and West Virginia §§ 43-44 (Repl.Vol. 1977). Virginia employs the M'Naghten "right and wrong" test of insanity. See Thornhill v. Peyton, 285 F. Supp. 104 (W.D.Va., 1968). [4] At the time of Brennan's trial, the Code of Virginia (1950), § 19.1-239 (now § 19.2-181) provided that a defendant acquitted by reason of insanity or feeblemindedness must be examined by three psychiatric experts to determine his sanity and whether his release would be dangerous to himself or to the public. The findings are reported to the court. Unless the court is satisfied that the acquitted person is both sane and no danger to himself or society, he must be committed. The commitment is not indefinite, however, since the committed individual is entitled to a periodic review of the "safe and sane" determination. See, gen., Note, The Virginia Procedure for Commitment and Release of Persons Acquitted by Reason of Insanity, 11 William and Mary Law Review 185 (1969).	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1894653/	561 F. Supp. 636 (1982) McALLEN STATE BANK, a Corporation, v. Jose A. SAENZ, Jr., United States of America, Texas Employment Commission, Simon Diaz d/b/a Texas Tool Co., and Jesse Garcia. Civ. A. No. B-79-180. United States District Court, S.D. Texas, Brownsville Division. August 24, 1982. 637 M. Lloyd Seljos, Judin & Barron, McAllen, Tex., for plaintiff McAllen State Bank. H. Hollis Rankin, III, Rankin & Kern, Inc., McAllen, Tex., for Simon Diaz d/b/a Texas Tool Co. Bill Kimbrough, Asst. Atty. Gen., State of Tex., Austin, Tex., for Texas Employment Comn. R.W. Rodrigues, Asst. U.S. Atty., Houston, Tex., for U.S. MEMORANDUM AND ORDER VELA, District Judge. This case involves the determination of the relative priority of various state and federal tax and judgment liens to the proceeds of a mortgage foreclosure sale of the property to which the liens attach. Plaintiff McAllen State Bank originally brought this action for judicial foreclosure in the District Court of Hidalgo County, Texas. It was subsequently removed to this Court upon petition by defendant United States of America, pursuant to 28 U.S.C. § 1444. FACTS The property which is the subject of this action was purchased by James E. Capt, Jose A. Saenz, Jr., and Jesse Garcia on December 15, 1976. To finance the purchase, the Metropolitan National Bank of McAllen loaned $13,500.00 to Capt, Saenz and Garcia. The loan was evidenced by a note in that amount and was secured by a deed of trust. 638 On June 28, 1977, Capt conveyed his interest in the property to Saenz and Garcia subject to the assumption of the note to Metropolitan National Bank, thereby extinguishing Capt's liability on the note. In order to pay off the debt to Metropolitan, Saenz and Garcia borrowed $10,000.00 from plaintiff McAllen State Bank on June 26, 1977. On the date of the Capt conveyance, Saenz and Garcia gave a deed of trust to McAllen State Bank to secure payment of the $10,000.00 note. Metropolitan executed a Release of Lien on July 20, 1977. McAllen State Bank thus became subrogated to the original purchase money lien of the original vendors and Metropolitan. On December 28, 1977, Saenz and Garcia executed a note in renewal and extension of their $10,000.00 debt to McAllen State Bank, that note being in the amount of $20,000.00 and secured by deed of trust. Plaintiff brought this action after Saenz and Garcia defaulted on the note of December 28, 1977. Plaintiff McAllen State Bank has moved for summary judgment, as have defendants Simon Diaz, d/b/a Texas Tool Company, Texas Employment Commission and the United States of America. Prior to the purchase of the property by Capt, Saenz and Garcia on December 15, 1976, the following liens were properly recorded against Jesse Garcia, d/b/a Prarca Construction Company: Filing Date Description Amount 1. 11/29/73 Notice of Federal Tax Lien $2,258.16 2. 1/22/74 Abstract of Judgment of 2,128.81 Simon Diaz, d/b/a Texas (bearing Tool Co. 6% interest, plus $709.60 attorney's fees and $32.00 costs) 3. 2/27/74 Notice of State Tax Lien 2,935.50 (Texas Employment Commission) 4. 1/9/75 Notice of Federal Tax Lien 549.96 5. 3/26/75 Abstract of Judgment of State 2,219.23 of Texas (Texas Employment (bearing 12% Commission) interest plus $25.50 costs) 6. 4/11/75 Notice of Federal Tax Lien 10,939.34 The federal tax lien recorded November 29, 1973 has expired and is therefore no longer being pursued by the United States. The abstract of judgment of the State of Texas relates to the Texas Employment Commission's tax lien recorded February 27, 1974. The parties have agreed that the Plaintiff is entitled to priority to the first $10,000.00 of the proceeds due to its subrogation to the purchase money lien of the original vendors and Metropolitan. The parties further agree that the Plaintiff is entitled to one-half of any proceeds over $10,000.00, up to the amount of its judgment, since the Plaintiff is the only party with a lien on Saenz's interest in the property. Left for this Court's determination are the priorities of the remaining liens, those being two federal tax liens and the judgment liens of Simon Diaz, d/b/a Texas Tool Company and the Texas Employment Commission. CONCLUSIONS OF LAW The priority of competing liens on property on which there is a federal tax lien is determined by federal law. Aquilino v. United States, 363 U.S. 509, 80 S. Ct. 1277, 4 L. Ed. 2d 1365 (1960). Priority under federal law is governed by the "first in time, first in right" rule as declared in United States v. New Britain, 347 U.S. 81, 74 S. Ct. 367, 98 L. Ed. 520 (1954). Under that rule, priority is given to the lien first perfected. Id. The lien for non-payment of federal taxes is imposed by § 6321 of the Internal Revenue Code, 26 U.S.C. § 6321,[1] and arises upon assessment of the tax. In order to be valid as against some classes of lienholders, including judgment lien creditors, notice of the lien must first be filed. 26 U.S.C. § 6323(a).[2] Thus, the dates of perfection of 639 the federal tax liens in this case are the dates the respective notices were filed. Under Texas law, a judgment lien is perfected when the abstract of judgment is filed and indexed in the proper county. Vernon's Ann.Civ.St. art. 5449. The judgment then operates as a lien on all of the defendant's real property situated in the county of filing, as well as upon all real estate thereafter acquired by the defendant. Id. The federal tax lien likewise extends to after-acquired property. Glass City Bank v. United States, 326 U.S. 265, 66 S. Ct. 108, 90 L. Ed. 56 (1945). In order for a state lien to prime a federal tax lien, not only must the lien be perfected first under state law, but it must also have become choate as determined by federal law prior to the filing of the notice of the federal tax lien. United States v. Pioneer American Insurance Co., 374 U.S. 84, 83 S. Ct. 1651, 10 L. Ed. 2d 770 (1963); United States v. New Britain, supra. The doctrine of choateness is intended to protect the standing of federal liens. "Otherwise, a State could affect the standing of federal liens, contrary to the established doctrine, simply by causing an inchoate lien to attach at some arbitrary time even before the amount of the tax, assessment, etc., is determined." United States v. New Britain, 347 U.S. at 86, 74 S. Ct. at 371. Therefore, the lien must "be perfected in the sense that there is nothing more to be done to have a choate lien when the identity of the lienor, the property subject to the lien, and the amount of the lien are established." Id., 347 U.S. at 84, 74 S. Ct. at 369. In this case, the judgment liens of Simon Diaz, d/b/a Texas Tool Company and the Texas Employment Commission were perfected and choate upon the filing of the respective abstracts of judgment and nothing more needed to be done to comply with the federal choateness requirement. The identity of the lienor and the amount of the liens were established. The property subject to the liens was also established, which consisted of all of the real property of Jesse Garcia located in the county, as well as any after-acquired real property so situated. The fact that the State liens are general in nature rather than directed at specific parcels of property does not defeat the requirement of choateness. United States v. Vermont, 377 U.S. 351, 84 S. Ct. 1267, 12 L. Ed. 2d 370 (1964). The real issue for decision is how after-acquired property is to be treated under these rules of priority. The United States argues that the liens attached simultaneously to the property and that federal liens prime other simultaneously attaching liens. Cited as authority is United States v. Graham, 96 F. Supp. 318 (S.D.Cal.1951), aff'd mem., 195 F.2d 530 (9th Cir.) cert. denied, 344 U.S. 831, 73 S. Ct. 38, 97 L. Ed. 647 (1952). Graham, however, does not stand for the proposition that federal liens prime other simultaneously attaching liens. That case involved a purported right of the State to set-off the defendant's debt against the amount owed by the State to the defendant. The federal tax assessment was received more than a year prior to the time that any right of set-off could have accrued to the State, and therefore the Court held that the federal lien had priority. "If the state had a right of set-off against the taxpayer prior to the United States' asserted lien and priority, the Collector would be bound to recognize the right of the state to set-off." United States v. Graham, 96 F.Supp. at 321. Under Texas law liens attach simultaneously to after-acquired property and are satisfied pro rata from the proceeds. Smith v. Kale, 32 Tex. 290 (1869); Matula v. Lane, 22 Tex. Civ. App. 391, 55 S.W. 504 (Tex.Civ. App.1900, writ ref'd.). Willis v. Downes, 46 S.W. 920 (Tex.Civ.App.1898, writ ref'd.). The same result was reached in United States v. Fleming, 474 F. Supp. 904 (S.D.N. Y.1979). The law of the State of New York was cited as authority for that holding. Id. at 908. As stated earlier, however, federal law governs priority when federal liens are involved. There appears to be no legal or policy reason that would mandate a deviation from the first in time, first in right rule. 640 The rule encourages the diligent filing of liens whether or not after-acquired property is involved. Therefore, the remaining one-half of the proceeds after payment to plaintiff McAllen State Bank of the first $10,000.00 and one-half of the remainder up to the amount of its mortgage, should be applied towards the outstanding liens as follows: First The January 22, 1974 judgment lien of Simon Diaz, d/b/a Texas Tool Company; Second The federal tax lien of January 9, 1975; Third The March 26, 1975 judgment lien of the Texas Employment Commission; Fourth The federal tax lien of April 11, 1975. Any award of attorney's fees, interest or costs which was reduced to judgment and included in the abstracts of judgment filed by Simon Diaz or the Texas Employment Commission shall maintain the same priority as the debt to which it relates. It appears to the Court that the defendant Jesse Garcia was served with citation by publication and was ordered to plead or otherwise appear herein on or before December 15, 1981. The defendant having failed to answer or otherwise appear, and both plaintiff McAllen State Bank and cross-plaintiff Simon Diaz, d/b/a Texas Tool Company having moved for Default Judgment, it is therefore ORDERED that Judgment of Default be entered against defendant Jesse Garcia, d/b/a Prarca Construction Company and that Judgment be entered foreclosing the liens of McAllen State Bank, Simon Diaz, d/b/a Texas Tool Company, the United States of America and the Texas Employment Commission, upon Lot Thirty-two (32), McColl Terrace Subdivision, Hidalgo County, Texas. The first $10,000.00 of the proceeds of the sale of said lot shall be paid to plaintiff McAllen State Bank, as well as one-half of the proceeds above $10,000.00, up to the amount of McAllen State Bank's mortgage. The other one-half of the proceeds over $10,000.00 shall be used to satisfy the liens of Simon Diaz, d/b/a Texas Tool Company, the United States of America and The Texas Employment Commission, in the order outlined above. The parties shall certify to the Court the amounts due and owing as of the date of this Order. Plaintiff shall submit a Proposed Judgment consistent with this Memorandum and Order. NOTES [1] "§ 6321. Lien for taxes If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." [2] Subsection (f) of § 6323 provides for filing the notice as designated by the laws of the state in which the property is located.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2986278/	August 6, 2013 JUDGMENT The Fourteenth Court of Appeals JOHNATHAN AUGUST, Appellant NO. 14-13-00643-CR V. THE STATE OF TEXAS, Appellee ________________________________ This cause was heard on the motion of the appellant to withdraw the notice of appeal. Having considered the motion, the Court orders the appeal DISMISSED. We further order appellant pay all costs expended in the appeal. We further order the mandate be issued immediately. We further order this decision certified below for observance.	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/1580188/	392 F.Supp. 460 (1975) UNITED STATES of America v. Mackey Raymond CHOICE et al. Crim. No. 74-664. United States District Court, E. D. Pennsylvania. April 25, 1975. 461 Frank J. Bove, Asst. U. S. Atty., Philadelphia, Pa., for plaintiff. Robert A. Stein, Philadelphia, Pa., for defendants. MEMORANDUM FOGEL, District Judge. Mackey Raymond Choice was indicted for bank robbery, conspiracy and unlawfully carrying a firearm during the commission of a felony, as a result of an incident which occurred at the Provident National Bank branch located at 3901 Conshohocken Avenue, Philadelphia, on October 16, 1974. Choice filed several pretrial motions, including a motion to suppress statements which were averred to have been made to agents of the Federal Bureau of Investigation (The Bureau). On January 20, 1975, we held evidentiary hearings on these motions, and on similar motions filed by Harry Glover, a co-defendant. On February 4, 1975, we denied each of the motions, and delivered oral findings of fact and conclusions of law in open court. The findings of fact and conclusions of law with respect to Choice's suppression motion can be found at pages 15-23 of the Notes of Testimony. Choice was thereafter tried before a jury and was found guilty on February 26, 1975, on those counts charging him with bank robbery and conspiracy, a judgment of acquittal having been entered by us prior to submission of the matter to the jury on the count relating to the unlawful carrying of a firearm. Imposition of sentence has been scheduled. At this juncture, however, we will further discuss the reasons for our ruling denying Choice's motion to suppress certain evidence which was subsequently admitted during the course of the trial.[1] Our previous findings of fact may be summarized as follows: On October 16, 1974, Choice was treated for gunshot wounds at the emergency room of Osteopathic Hospital in Philadelphia. According to the stipulation of the parties:[2] * * As soon as Mr. Choice was admitted into the emergency room of Osteopathic Hospital, an intravenous solution procedure was started. A tube was placed in Mr. Choice's vein at the crook of the right arm, near the bend in the elbow. A 1000 c.c. lactated ringer solution was administered. This is a mixture of water and sodium and is used to expand the blood volume to prohibit shock. This procedure began at approximately 1:00 when Mr. Choice was first admitted. A Foley [catheter] was inserted into Mr. Choice's penis. A Foley [catheter] is a soft, latex tube with a balloon-type mechanism on the end. Once inserted into the penis, the balloon is blown up. The [catheter] monitors the rate of urinary flow 462 which tells whether or not an individual is going into shock. It is also used to see if there is blood in the urine which would be an indication of internal damage, or damage to the liver. A physical examination was then conducted. It was determined that there was a gunshot wound behind the right thigh and there was another gunshot wound near the right foot on the right side. Mr. Choice's pulses were good and there was no neurologic loss. There was a hematoma on the right thigh which is a bruise and discoloration. Mr. Choice seemed alert and in stable condition. There were numerous uniformed police officers present as well as several detectives from the Philadelphia Police. In addition, many students from the hospital were in the emergency room as well as two police doctors. * * A blood sample of Mr. Choice was taken and received in the laboratory on October 16, 1974, at approximately 1:43 P.M. Blood tests indicate that there was nothing unusual about Mr. Choice's blood content. However, a routine urinalysis indicated that there was an abnormal amount of protein in the urine as indicated by a +2 [albumin] test. Moreover, there were traces of acetone in the urine as well as traces of bilirubin. Moreover, there were traces of uroliduogen. This indicates there was an abnormal urinalysis and there was probably something wrong with Mr. Choice's liver which could have left him in pain. Mr. Choice was later x-rayed and it was found that there was a fracture of the left inferior pelvicrami, which is the bridge of bone in front of the penis. There was a commuted fracture of the right anterior and post-anterior thigh. There were metallic bullets within the range of the left buttock, the right mid-thigh, and the right distal leg. Dr. James Harris treated Choice at Osteopathic Hospital. While Dr. Harris thinks that Choice may have requested an attorney at that time, he admits that he is only "about fifteen percent certain" that Choice did request an attorney, and further admits that he was busily engaged in the emergency room on that day and would not now recognize Choice if he saw him.[3] Before Choice left Osteopathic Hospital, bandages were applied to his wound and a splint to his right leg. He was taken from Osteopathic Hospital to the Emergency Room of Philadelphia General Hospital (PGH), where he received the following treatment. Again, we quote the stipulation of the parties:[4] * * * Mr. Choice had sustained a gunshot wound to the right thigh and right ankle and there was a bullet tracted on the right thigh to the right femoral head but no fracture. There was another bullet tracted through to the left ramus of the pubis and a compound fracture of the left gluteal area laterally. The right ankle was shattered and there was a fracture of the tibia. There was a gross hematoma of the right leg and there was a Foley [catheter] in the patient's penis. His right leg was also in a splint. There was a massive swelling of the right thigh as a result of the wound. During the emergency examination, and while preliminary diagnosis was being obtained, Dr. O'Yek [the treating physician] observed that the patient, Mr. Choice, was in moderate pain as indicated by his visual observations of the patient's reactions to movement and to the treatment. The intravenous solution that had been applied at Osteopathic Hospital was maintained and Mr. Choice's temperature was found to be 101°. The exterior of the wounds were treated in the emergency 463 ward and Mr. Choice was given several forms of antibiotics. * * On the afternoon of October 16, 1974, Special Agent Robert Legg of The Bureau went to the emergency room at PGH for the purpose of interviewing Choice as a suspect in the bank robbery which had occurred earlier that day at the Provident National Bank. Agent Legg went up to Choice, identified himself as a special agent, and asked Choice if he would like to make a statement. Prior to doing so, he had not personally discussed Choice's condition with the medical staff at PGH. At this confrontation, Choice did not explicitly refuse to make a statement, but merely remained silent, and did not acknowledge the presence of Agent Legg at all. Agent Legg did not advise Choice of his rights at that time due to defendant's absolute silence throughout the encounter. (N.T. 8-16, January 20, 1975). Thereafter, Choice was transferred from the emergency room to the Intensive Care Unit of the Surgical Division of PGH, where an arteriogram was performed. * * * An arteriogram is a test whereby a large needle filled with dye is inserted into one of the patient's major arteries. A dye-type solution is injected and an xray is then taken of the patient to see if any bullet passed through any artery. Normally, this test causes heat to the patient. This heat sensation can be painful as there is a definite burning sensation. The arteriogram was done at approximately 6:00 in the evening. * * * * * * Dr. A. Saragovi, M.D., * * * administered the arteriogram that is mentioned above to Mr. Choice. The procedure for this examination was to place Mr. Choice under local Xylocaine anesthesia in the right groin, and then place an 18 gauge Seldinger needle in the common femoral artery using the Seldinger technique and a guide wire followed by a polyethylene catheter advanced to the lower abdominal aorta. This procedure was done in the xray department and it was concluded that there was no evidence of arterial injuries or bleeding. However, there is a suggestion of minimal spasm at the take-off of the left profunda femoral artery.[5] The arteriogram established that there was no indication of arterial damage, and Choice was removed from the surgical ward to the orthopedic ward of PGH, where a cast was placed on his lower right leg. The x-rays taken at the time of Choice's admission to PGH revealed a bullet lodged in the region of the gluteal muscle between the anterior-inferior iliac spine in the greater trochanter. The soft tissue density in this area implied a hematoma. There was a missile tract leading medially, which also contained bone fragments. Further, there was a cortical fracture of the inferior pubic ramus. Shortly after Choice's admission, the drug keflin, an antiobiotic, and a tetanus toxoid shot were administered. The parties also have stipulated that by midnight of October 16, 1974, "all emergency care and diagnostic treatment were complete and Mr. Choice was resting in the Orthopedic Ward surrounded by a police escort."[6] At approximately 1:00 P.M. on October 17, 1974, Officer Ennis Mitchell of the Homicide Division, Philadelphia Police Department, went to PGH for the purpose of interviewing Choice in connection with the robbery at the Provident National Bank the previous day. Prior to interviewing Choice, Mitchell did not personally inquire about Choice's condition from physicians on the hospital staff, but he did ask a nurse whether Choice was awake and whether he could talk, and received affirmative answers to both questions. Choice was in a ward on the fourth floor of Building #17 at 464 PGH, guarded by two police officers. One of his arms was in a sling, and there may have been an intravenous device, but there were not tubes in his nose or mouth. When Mitchell approached the bed, Choice's eyes were open and he appeared to be awake. Mitchell immediately informed Choice that he wished to question him concerning the robbery of the Provident National Bank, and advised him of his rights according to a standard Philadelphia Police form: "We are questioning you concerning the hold up of Provident Bank at 3901 Conshohocken Avenue on 10/16/74 at approximately 12:50 p. m. "You have a right to remain silent and do not have to say anything at all. "Anything you say can and will be used against you in court. "You have a right to talk to a lawyer of your own choice before we ask you any questions; also to have a lawyer here with you while we ask questions. "If you are willing to give us a statement you have a right to stop any time you wish. "Do you understand that you have a right to keep quiet and do not have to say anything at all?" And his response was "Yes." "Do you understand that anything you say can and will be used against you" Again his response was "Yes." "Do you want to remain silent?" "No." "Do you understand that you have a right to talk with a lawyer before we ask you any questions?" His answer was "Yes". "Do you understand if you cannot afford to hire a lawyer and you want one we will not ask you any questions until a lawyer is appointed for you free of charge?" His answer was "Yes." "Do you want either to talk with a lawyer at this time or to have a lawyer with you while we ask you questions?" His answer was "No." "Are you willing to answer questions of your own free will without force or fear and without any threats or promises having been made to you?" His answer was "Yes." (N.T. 19-20, January 20, 1975). During the course of the next two hours, Mitchell interviewed Choice about his participation in the bank robbery, and also discussed other matters not included in the notes produced at the pretrial hearing. Choice answered some questions and did not respond to others. It was never necessary to rouse Choice at any time during the interview in order to get his attention. Mitchell asked Choice to sign the notes taken at the interview, but he refused to do so. The Bureau agents, R. Douglas King and Dennis Sackreiter went to PGH later that afternoon, at approximately 3:00 P.M., or shortly thereafter, and requested permission from the head nurse to interview Choice. The nurse spoke to a physician by telephone, and permission was granted. The agents did not, however, make specific inquiries with respect to Choice's physical condition. They located Choice in the orthopedic ward, informed him that they wished to speak to him concerning the robbery of the Provident National Bank the previous day, and furnished him with The Bureau advice of rights form. Choice looked at the form, keeping it in his possession for two or three minutes, and stated that he knew what it was and understood it; however, he refused to sign the form. From 3:23 P.M. until 3:46 P.M. the agents questioned Choice, and showed him a bank surveillance photograph. At one point, Choice stated that he did not wish to say anything further without the advice of counsel, and the interview there and then terminated.[7] Within this factual framework, we shall discuss the legal issues pertinent to Choice's motion to suppress the statement made to Agents King and Sackreiter of The Bureau. This motion is 465 grounded upon the assertion that Choice did not knowingly and intelligently waive his Fifth and Sixth Amendment rights prior to being interviewed at the orthopedic ward of PGH, and, further, that any statement given under such circumstances cannot be considered voluntary under the applicable legal standards. In Miranda v. Arizona, 384 U.S. 436, 475, 86 S.Ct. 1602, 1628, 16 L.Ed.2d 694 (1966), the Supreme Court held that, in the context of custodial interrogation, "a heavy burden rests on the government to demonstrate that the defendant knowingly and intelligently waived his privilege against selfincrimination and his right to retained or appointed counsel." While the Court has set high standards of proof for the waiver of constitutional rights, Johnson v. Zerbst, 304 U.S. 458, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938), it is now settled that a confession which is challenged on constitutional grounds, including lack of voluntariness, is admissible if the Court is satisfied by a preponderance of the evidence that the legal requirements for admission have been met; it is not necessary to establish admissibility beyond a reasonable doubt, Lego v. Twomey, 404 U.S. 477, 92 S.Ct. 619, 30 L.Ed.2d 618 (1972). The procedure to be followed by the trial court is aptly delineated in Petty-john v. United States, 136 U.S.App.D.C. 69, 419 F.2d 651, 654, n. 7 (1969), cert. den. 397 U.S. 1058, 90 S.Ct. 1383, 25 L. Ed.2d 676: * * * the validity of any Miranda waiver must be determined by the court's inspection of the particular circumstances involved, including the education, experience and conduct of the accused as well as the credibility of the police officer(s) testimony. The court will then objectively assess all the aforementioned factors and determine whether the waiver was valid." In weighing the facts of the instant case as they relate to the admissibility or exclusion of Choice's statement, we shall limit our discussion to the following issues: (1) Were valid Miranda warnings given to Choice by Agent King on October 17, 1974? (2) Was the effect of these warnings vitiated by Choice's prior silence when confronted by Agent Legg on October 16, 1974? (3) Was Choice physically and mentally capable of making a knowing, intelligent, and voluntary decision to waive his right to remain silent and his right to counsel? 1. The validity of Miranda warnings given to Choice on October 17, 1974. Prior to any questioning, Agent King furnished Choice with a standard Bureau advice of rights form which tracks the language of the Miranda decision.[8] See United States v. Leland, 376 F.Supp. 1193, 1200 (D.Del.1974). 466 Although we believe a preferable course of action would be for The Bureau agents to read the form outlining Miranda rights aloud, in contrast to handing the form to the person they are seeking to question, the latter procedure does not vitiate the warning eo ipso. In this respect, the method employed by Officer Mitchell is more desirable than that used by Agent King. However, under the facts of this case, we are satisfied that Agent King adequately advised Choice of his rights. Choice looked at the form, retained it in his possession for two or three minutes, and then affirmatively stated that he knew what it was and understood it. Less than three hours earlier, Choice had been extensively informed orally of these same rights by Officer Mitchell when he read the form to him, and had fully answered questions put by Officer Mitchell, thus demonstrating his comprehension of the significance of his agreement to talk then and there. The fact that Choice did not sign the advice of rights form does not, per se, defeat the validity of a waiver of constitutional rights; Miranda requires only that a waiver of rights be made voluntarily, knowingly, and intelligently, and does not demand that such a waiver be in writing. United States v. Speaks, 453 F.2d 966, 969 (1st Cir. 1972), cert. den. 405 U.S. 1071, 92 S.Ct. 1522, 31 L. Ed.2d 804. Moreover, Choice's refusal to sign the advice of rights form did not, under the curcumstances of this case, demonstrate a desire to remain silent. See United States v. Cassino, 467 F.2d 610, 620 (2d Cir. 1972), cert. den. 410 U.S. 928, 93 S.Ct. 1363, 35 L.Ed.2d 590; United States v. Speaks, supra, 453 F.2d at 969; United States v. Crisp, 435 F.2d 354, 358 (7th Cir. 1970). On the contrary, his statement that he was familiar with and understood the form establishes his knowledge of its substance and implications; this fact is underscored by his willingness immediately after reading it to answer certain questions posed by the agents, coupled with his refusal to speak when he did not wish to respond. His selective responses are the strongest evidence of his comprehension of his rights. Indeed, in this regard his complete understanding of his rights is further buttressed by the fact that his conduct, in answering certain questions, and refraining from responding to others, was consistent with his actions when interviewed by Officer Mitchell, who had read all of the rights aloud to Choice and questioned him extensively about his willingness to waive them. While a waiver of constitutional rights may not be inferred from mere silence, or from the fact that a statement was in fact eventually obtained, Miranda v. Arizona, supra, 384 U.S. at 475, 86 S.Ct. 1602, it is clear that "[w]aiver may be inferred from the language, acts, conduct and demeanor of a defendant", United States v. Cavallino, 498 F.2d 1200, 1204 (5th Cir. 1974). 2. The effect of Choice's silence when confronted by Agent Legg on October 16, 1974. On October 16, 1974, Agent Legg visited the emergency ward of PGH and asked Choice if he wanted to make a statement. Choice did not explicitly refuse to make such a statement, but merely remained silent, without acknowledging the agent's presence. The constitutional issue, therefore, is whether Choice's silence on October 16, 1974, should have barred the admissibility of the statements taken the following day by Agent King. In Miranda v. Arizona, the Supreme Court stated: Once warnings have been given, the subsequent procedure is clear. If the individual indicates in any manner, at any time prior to or during questioning, that he wishes to remain silent, the interrogation must cease. At this point he has shown that he intends to exercise his Fifth Amendment privilege; any statement taken after the person invokes his privilege cannot be other than the product of compulsion, subtle or otherwise. Without the 467 right to cut off questioning, the setting of in-custody interrogation operates on the individual to overcome free choice in producing a statement after the privilege has been once invoked. If the individual states that he wants an attorney, the interrogation must cease until an attorney is present. At that time, the individual must have an opportunity to confer with the attorney and to have him present during any subsequent questioning. If the individual cannot obtain an attorney and he indicates that he wants one before speaking to police, they must respect his decision to remain silent. Id., 384 U.S. at 473-474, 86 S.Ct. at 1627. This language would produce bizarre results if literally construed to mean that once the Fifth Amendment privilege is invoked, no statement taken thereafter can ever be admitted in evidence against the accused. Lower federal courts have generally declined to adopt such an extreme position. As the Court of Appeals for the Second Circuit en banc stated in United States v. Collins, 462 F.2d 792, 801-802 (2d Cir. 1972), cert. den. 409 U.S. 988, 93 S.Ct. 343, 34 L.Ed.2d 254. We ordered rehearing in banc to resolve what appeared to be a difference of view whether a sentence in the majority opinion in Miranda v. Arizona [citation omitted.] "If the individual indicates in any manner, at any time prior to or during questioning, that he wishes to remain silent, the interrogation must cease," required that interrogation must cease forever [except in some circumstances where an attorney is present], or whether Miranda allowed renewal in proper circumstances. As a result of study of the additional briefs submitted by the parties and further discussion, we are agreed that what Miranda requires is that "interrogation must cease" until new and adequate warnings have been given and there is a reasonable basis for inferring that the suspect has voluntarily changed his mind. United States v. Collins was followed in Hill v. Whealon, 490 F.2d 629, 635 (6th Cir. 1974): Hill contends that his confession was involuntary as a matter of law. He asserts that once he was advised of his Miranda rights and declined to make a statement, the police were precluded at all times thereafter from asking him any questions or talking with him about the case in any way. We join other circuits in refusing to adopt such a narrow construction of Miranda. In some circumstances, of course, prior assertion of Miranda rights may render inadmissible a subsequent confession, particularly when interrogation continues after refusal by the suspect to speak, United States v. Crisp, 435 F.2d 354, 357 (7th Cir. 1970), cert. den. 402 U.S. 947, 91 S.Ct. 1640, 29 L.Ed.2d 116; United States v. Wedra, 343 F.Supp. 1183, 1188, n. 24 (S.D.N.Y. 1972); or is resumed shortly thereafter, United States v. Clark, 499 F.2d 802, 807 (4th Cir. 1974) (interval of four hours). In the instant case, we conclude that Choice's silence when confronted by Agent Legg does not affect the admissibility of statements given the following day to Agents King and Sackreiter. FIRST: It is far from certain that Choice's silence on October 16, 1974, was in fact intended as an assertion of Fifth or Sixth Amendment rights. Agent Legg testified that Choice simply failed to respond when asked if he wished to make a statement:[9] A. * * * I located Mr. Choice and identified myself as a special agent 468 and asked if he would care to talk to us and he remained silent. Q. Do you remember how long you were in Mr. Choice's presence? A. Approximately, I would guess, two or three minutes. Q. Did you have any opportunity to advise him of his rights? A. No, I didn't. Q. Do you remember exactly what you said? A. Identified myself as an agent and I asked Mr. Choice, "Would you care to tell us what happened?" He remained silent. Q. Did he make any response at all? A. No. Q. Did he say anything at all while you were in his presence? A. No, he didn't. MR. BOVE: Cross examine. THE COURT: You say you were with him about two or three minutes? THE WITNESS: I was standing in the presence of Mr. Choice for two or three minutes as they were getting ready to take him upstairs for further x rays. * * * * * Q. You asked him if he would like to make a statement? Were those your exact words? A. Yes. Q. Before you asked him that question did you give him any warnings about his constitutional rights? A. At the moment before I contacted him, no. I did not. Had he been willing to talk to me I would have advised him of his rights. THE COURT: Is it your statement, Agent Legg, that he made no response whatsoever? He didn't even say, "No, I won't talk to you."? THE WITNESS: That's correct. THE COURT: Just remained silent? THE WITNESS: Right. Q. Did Mr. Choice look at you? A. Yes. Q. Did he acknowledge your presence in any way? A. No, he did not. Q. Did you have any indication when you spoke to Mr. Choice that, in fact, he realized you were with the F.B.I.? A. I don't know. * * * * * * Q. Agent Legg, Mr. Stein referred to defendant Choice's refusal to talk to you. Did he actually refuse to talk to you? A. Well, he remained silent and they were in the process of taking him upstairs for further X rays and I don't know if it was a blank refusal or not. He just didn't say anything. (N.T. 9-10, 12-13, 15, January 20, 1975). SECOND: Even if Choice's silence on October 16, 1974, is interpreted as a claim of Fifth or Sixth Amendment rights, we are completely satisfied from the evidence adduced at the suppression hearing that "new and adequate warnings" were given prior to the interviews conducted the following day, and that "there is a reasonable basis for inferring that [Choice] voluntarily changed his mind", United States v. Collins, supra, 462 F.2d at 801-802. We have previously determined that the Miranda warnings were given to Choice by Agent King comport with constitutional standards. We conclude from the following facts that whatever his attitude may have been on October 16th, he had changed his mind by the afternoon of October 17th, and voluntarily gave his statement with complete knowledge of the ramifications of his action. On October 16, 1974, Choice was in the middle of treatment for gunshot wounds which had been inflicted a short time earlier. By midnight, however, diagnosis and emergency treatment had been completed, and Choice was allowed to rest in the orthopedic ward of PGH. 469 It was not until 1:00 P.M. on the following day that Officer Mitchell sought to interview Choice. In this respect the instant case is distinguishable from United States v. Crisp and United States v. Wedra, supra (immediate interrogation after refusal) and United States v. Clark, supra (four hour delay). During the intervening period from the initial contact by Agent Legg on the afternoon of the 16th, until the interview by Officer Mitchell on the 17th, Choice had ample opportunity to reconsider his prior refusal to talk, if in fact his silence on the previous day was a refusal to communicate. Since he was apprehended at the bank, he may have felt that he had nothing further to lose by answering some questions posed by the Philadelphia police and the agents of The Bureau. In addition, Officer Mitchell showed Choice bank surveillance photographs which appeared in a Philadelphia newspaper. While it is not clear from the record at what point these photographs were shown or when Choice became aware of their existence, this knowledge may have affected Choice's willingness to talk thereafter. Agent King showed Choice a bank surveillance photograph prior to any questioning, although subsequent to Miranda warnings; he reported that Choice said that such photographs "tell the story and any jury in the world would arrive at a guilty verdict."[10] In summary, therefore, assuming arguendo that Choice refused to speak to Agent Legg on October 16, 1974, it is clear that his refusal, under all of the circumstances of this case, cannot serve as a basis for excluding the subsequent statement given on October 17th. As the original panel stated in Collins, supra, 462 F.2d at 797: Here Collins was not subjected to any immediate re-interrogation, but only was asked to reconsider his refusal to answer. So long as such reconsideration is urged in a careful, noncoercive manner at not too great length and in the context that a defendant's assertion of his right not to speak will be honored, it does not violate the Miranda mandate. In the circumstances of this case, even if Collins' confession were in response to Agent Hardin's request, it was not made involuntarily. 3. Choice's physical and mental condition on October 17, 1974. In order to determine the validity of the waiver of Fifth and Sixth Amendment rights by Choice, and the voluntariness of his statements, we must assess his physical and mental condition at the time statements were given. It is true that under certain circumstances a subsequent confession may be rendered inadmissible when a defendant has suffered gunshot wounds, has been hospitalized, and has had medication administered; see Beecher v. Alabama, 389 U.S. 35, 88 S.Ct. 189, 19 L.Ed.2d 35 (1967). This District, however, has rejected a per se rule that a serious gunshot wound must be presumed to leave its victim incapable of exercising free volition and making rational choices, United States v. Foster, 337 F.Supp. 696, 698 (E.D.Pa. 1972). At the hearing on January 20, 1975, we took extensive evidence concerning Choice's condition on October 17, 1974, both by way of oral testimony and through the two stipulations of the parties. While Choice was given emergency treatment at Osteopathic Hospital and at PGH on October 16, 1974, it is stipulated that by midnight all emergency and diagnostic care had been completed, and Choice was resting in the orthopedic ward at PGH. When Officer Mitchell went to PGH on the afternoon of October 17, 1974, he was informed that Choice was awake and could talk. Mitchell testified that one of Choice's arms was in a sling, but that there were no tubes in his nose or mouth, and that when he approached the bed, Choice appeared to be awake. It 470 was never necessary to rouse him to get his attention. To the contrary, he was alert throughout the entire session. Agent King requested permission to interview Choice, and this permission was granted by the head nurse after consultation by telephone with a physician. Neither Officer Mitchell nor Agent King testified to any apparent lack of alertness, confusion, or signs of great physical discomfort or pain on the part of Choice. Choice's rationality and comprehension are demonstrated, as noted, by his willingness to answer some questions and his refusal to respond to others, particularly those concerning the identity of the third man at the scene of the robbery. Moreover, he refused to sign a statement in the form of notes prepared by Officer Mitchell, refused to sign the waiver of rights form offered by Agent King, and stated at one point during the interview by Agent King that he did not wish to make any further statements without the advice of counsel, at which point the interview terminated.[11] Each of these actions belies the claim that Choice was incapable of exercising free volition or making rational decisions. To the contrary, his actions demonstrate complete awareness of what was transpiring and the exercise of his own independent judgment throughout the proceedings. It would be ironic indeed if we were to hold that a confession will be admissible only when police authorities are able to tie up the entire confession package with a tidy bow, and will not be admissible under circumstances in which a defendant exercises the selectivity demonstrated by the facts in this case. On the basis of this record, we conclude that Choice's physical and mental condition on October 17, 1974, did not render him incapable of waiving his right to counsel and his privilege against self-incrimination, nor render involuntary statements given to The Bureau. For the reasons discussed above, we reaffirm that Choice validly waived his right to counsel and his privilege against self-incrimination in a knowing, intelligent, and voluntary manner, and that the statement made to Agent King was voluntary and admissible at the trial on the merits.[12] NOTES [1] We also denied a motion to suppress statements allegedly made to Officer Ennis Mitchell of the Philadelphia Police Department. At trial, however, the government did not seek to introduce this statement into evidence. In the course of the present discussion we shall consider the circumstances of the interview conducted by Officer Mitchell in connection with the admissibility of statements allegedly made to Agent King of The Bureau, and the effect of that episode in establishing (as per the findings of fact and conclusions of law previously entered, as well as the reasons set forth in this memorandum), that defendant fully comprehended his rights when interviewed by The Bureau Agents, and consciously and voluntarily decided to make a statement, which conduct was consistent with his actions previously that same afternoon, when he made the statement he did to Officer Mitchell. [2] Marked as Choice's Exhibit No. 1 at the hearing on January 20, 1975. [3] See Choice's Exhibit #2 to the suppression hearing on January 20, 1975. [4] See Choice's Exhibit #1 to the suppression hearing on January 20, 1975. [5] Stipulation, Choice's Exhibit #1 at the hearing on January 20, 1975. [6] Stipulation, Choice's Exhibit #1 at the hearing on January 20, 1975. [7] Exhibit G-3 at the hearing on January 20, 1975. [8] INTERROGATION; ADVICE OF RIGHTS YOUR RIGHTS Place ______ Date ______ Time ______ Before we ask you any questions, you must understand your rights. You have the right to remain silent. Anything you say can be used against you in court. You have the right to talk to a lawyer for advice before we ask you any questions and to have him with you during questioning. If you cannot afford a lawyer, one will be appointed for you before any questioning if you wish. If you decide to answer questions now without a lawyer present, you will still have the right to stop answering at any time. You also have the right to stop answering at any time until you talk to a lawyer. WAIVER OF RIGHTS I have read this statement of my rights and I understand what my rights are. I am willing to make a statement and answer questions. I do not want a lawyer at this time. I understand and know what I am doing. No promises or threats have been made to me and no pressure or coercion of any kind has been used against me. Signed ______ Witness: ______ Witness: ______ Time: ______ [9] We give no weight to Dr. Harris' statement that he is "about fifteen percent certain" that Choice requested an attorney in the emergency room at Osteopathic Hospital. Dr. Harris admitted that he had heard several patients request to see an attorney during his service in the emergency room, and that he would not recognize Choice if he saw him today. Stipulation, Choice's Exhibit #2 at the hearing on January 20, 1975. [10] Exhibit G-3 at the hearing on January 20, 1975. [11] Exhibit G-3 to the hearing on January 20, 1974. [12] Although the parties have not framed the issue in these terms, we conclude that, in addition to its admissibility under Miranda and the related case law, the statement was voluntary within the criteria of 18 U.S.C. § 3501.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1655924/	301 F.Supp. 982 (1969) STATE OF HAWAII, Plaintiff, v. STANDARD OIL COMPANY OF CALIFORNIA, Union Oil Company of California, Shell Oil Company, and Chevron Asphalt Company, Defendants. Civ. No. 2826. United States District Court D. Hawaii. July 2, 1969. 983 Bert T. Kobayashi, Atty. Gen. of Hawaii, Gilbert K. Hara, Joseph Kinoshita, Deputy Attys. Gen., Dept. of the Attorney General, Honolulu, Hawaii, Law Offices of Joseph L. Alioto, Joseph L. Alioto, Maxwell M. Blecher, Francis O. Scarpulla, San Francisco, Cal., for plaintiff. Francis R. Kirkham, Richard J. MacLaury, James B. Atkin, Pillsbury, Madison & Sutro, San Francisco, Cal., Daniel H. Case, Pratt, Moore, Bortz & Case, Roy A. Vitousek, Jr., Honolulu, Hawaii, for defendants Standard Oil and Chevron Asphalt. L. A. Gibbons, Douglas C. Gregg, E. A. McFadden, Los Angeles, Cal., Moses Lasky, Malcolm T. Dungan, Brobeck, Phleger & Harrison, San Francisco, Cal., Frank D. Padgett, Honolulu, Hawaii, for defendants Union Oil. Gilbert E. Cox, William M. Swope, Smith, Wild, Beebe & Cades, Honolulu, Hawaii, S. R. Vandivort, New York City, William Simon, Richard T. Colman, Howrey, Simon, Baker & Murchison, Washington, D. C., for defendant Shell Oil. DECISION ON PLAINTIFF'S PARENS PATRIAE COUNT PENCE, Chief Judge. The State of Hawaii brought this antitrust action against three oil companies and a subsidiary of one, alleging in Count I of its Fourth Amended Complaint, basically, that the defendants violated Sherman 1 and 2 by bid rigging, price fixing, market monopolization, and other acts in restraint of trade, and asks for damages based upon the illegal excess prices paid for defendants' products by the State in its proprietary capacity, as a buyer of petroleum products. In Count II the State "brings this action by virtue of its duty to protect the general welfare of the State and its citizens, acting herein as parens patriae, trustee, guardian and representative of its citizens, to recover damages for, and secure injunctive relief against, the violations of the antitrust laws hereinbefore alleged."[1] Plaintiff continues to allege that the combination and conspiracy of the defendants in restraint of trade and to monopolize the sale, marketing and distribution of refined petroleum products has "injured and adversely affected the economy and prosperity of the State of Hawaii" by: "(a) revenues of its citizens have been wrongfully extracted from the State of Hawaii; "(b) taxes affecting the citizens and commercial entities have been increased to affect such losses of revenues and income; "(c) opportunity in manufacturing, shipping and commerce have been restricted and curtailed; "(d) the full and complete utilization of the natural wealth of the State has been prevented; "(e) the high cost of manufacture in Hawaii has precluded goods made 984 there from equal competitive access with those of other States to the national market; "(f) measures taken by the State to promote the general progress and welfare of its people have been frustrated; "(g) the Hawaii economy has been held in a state of arrested development."[2] Plaintiff then alleges it "has not yet ascertained the precise extent of said damage to itself and its citizens;" but asked leave to insert such sum when ascertained.[3] Defendants moved to dismiss Count IImaintaining (a) "there can never be a parens patriae suit for damages; such a suit lies only in equity, and only for preventive relief;" (b) "Count II does not in fact allege any injury to the general economy of the State of Hawaii, or to Hawaii in its sovereign or quasi-sovereign capacity, that would support a parens patriae injunction;" (c) a parens patriae suit for damages is not maintainable under Section 4 of the Clayton Act which permits damages only to business and property, arguing that damages to a state's business or property are by definition and nature not damages to its sovereignty or quasi-sovereignty; (d) if dollar damages to the economy of the State were measured by the harm done to the individual inhabitants, there would be created the risk of double recovery, inasmuch as each of the State's inhabitants, in theory at least, would be entitled to sue for any direct damage to his own business or property; and (e) a parens patriae suit for damages under the antitrust laws will not lie because an injury to the state's sovereignty is by its very nature too remote or speculative to be measurable in money damages. The problem has been twice fully briefed and argued by all parties.[4] The concept of a parens patriae count in an antitrust action of the nature of the present one, emanates from Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945), where the Supreme Court granted the State of Georgia's motion to file an amended complaint which alleged and sought relief from an antitrust violation by twenty railroad companies. The amended complaint asserted four counts of injury, the Third and Fourth of which sought treble damages for the alleged discriminatory freight rates charged the State and its citizens.[5] The Supreme Court held that Georgia had properly asserted a cause of action for injunctive and damage relief as parens patriae as well as proprietor, and permitted the complaint involving the Court's original jurisdiction to be filed. The Court stated: "Georgia, suing for her own injuries, is a `person' within the meaning of § 16 of the Clayton Act, 15 U.S.C.A. § 16; she is authorized to maintain suits to restrain violations of the antitrust laws or to recover damages by reason thereof. * * * But Georgia is not confined to suits designed to protect only her proprietary interests. The rights which Georgia asserts, parens patriae, are those arising from an alleged conspiracy [which] * * * 985 injured the economy of Georgia. * [W]hen it came to other sanctions Congress * * * authorized civil suits not only by the United States but by other persons as well. And we find no indication that, when Congress fashioned those civil remedies, it restricted the States to suits to protect their proprietary interests. Suits by a State, parens patriae, have long been recognized. There is no apparent reason why those suits should be excluded from the purview of the anti-trust acts." 324 U.S. at 447, 65 S.Ct., at 721. (Emphasis added.) "Since the claim which Georgia asserts as parens patriae as well as proprietor meets the standards of justiciability and since Georgia is a `person' entitled to enforce the civil sanctions of the anti-trust laws, the reasons which have been advanced for denying Georgia the opportunity to present her cause of action to this Court fail." 324 U.S. at 452, 65 S.Ct., at 723. (Emphasis added.) After allowing the State of Georgia to file its complaint seeking both equitable and legal relief and stating that all civil antitrust sanctions are available to the State in both its proprietary and parens patriae capacities, the Court ruled that damages based on the allegedly excessive freight rates would not be permissible, solely because they had been approved by the ICC and were therefore "legal" rates.[6] This is the only case which either counsel or the court has uncovered which lends precedential support to the claim that a state may recover money damages, trebled, in an antitrust action under the aegis of a parens patriae claim. There are many cases, however, which have passed upon the primary problem of whether a state has sufficient interest in a controversy to be entitled to sue as parens patriae. In the determination of the state's standing to sue, each case poses a question of law which can be determined only by an analysis of the particular facts concerned. Generally it has been the Supreme Court which has determined whether a state has properly stated a claim as parens patriae. This is because of the Court's original jurisdiction over controversies between states or between a state and citizens of another state. In passing upon the appropriateness of a parens patriae claim, the Supreme Court acted in its capacity as a finder of fact, thus performing a function usually undertaken by a lower tribunal. In Georgia v. Tennessee Copper Co., 206 U.S. 230, 238, 27 S.Ct. 618, 620, 51 L.Ed. 1038 (1907), the Supreme Court permitted the State of Georgia to sue to enjoin fumes from a copper plant across the state border from injuring land in five (5) Georgia counties, very little of which was owned by the State, stating: "* * * [W]e are satisfied, by a preponderance of evidence, that the sulphurous fumes cause and threaten damage on so considerable a scale to the forests and vegetable life, if not to health, within the plaintiff state as to make out a case [parens patriae] * * ." (Emphasis added.) Based on its view of the facts, the Supreme Court has entertained suits parens patriae to (a) restrain diversion of water from an interstate stream, Kansas v. Colorado, 206 U.S. 46, 95-96, 27 S.Ct. 655, 51 L.Ed. 956 (1907); (b) enjoin changes in drainage which increase the flow of water in an interstate stream, North Dakota v. Minnesota, 263 U.S. 365, 374, 44 S.Ct. 138, 68 L.Ed. 342 (1923); (c) preclude restraints on the commercial flow of natural gas, Pennsylvania v. West Virginia, 262 U.S. 553, 43 U.S. 658, 67 L.Ed. 1117 (1923); and (d) restrain the discharge of sewage into the Mississippi 986 River and New York Bay, Missouri v. Illinois and Sanitary District of Chicago, 180 U.S. 208, 21 S.Ct. 331, 45 L.Ed. 497 (1901) and New York v. New Jersey, 256 U.S. 296, 41 S.Ct. 492, 65 L.Ed. 937 (1921). See also Pennsylvania v. West Virginia, supra at 592, 43 S.Ct., at 663, where the Supreme Court, after finding a sufficient basis for a suit parens patriae, distinguished certain prior opinions on the ground that "the facts on which they turned, as the opinions show, were so widely different from those here that they are not in point." (Emphasis added.) Conversely, the Supreme Court has rejected the propriety of suits parens patriae to (a) enforce claims of a bank's creditors and depositors, Oklahoma v. Cook, 304 U.S. 387, 58 S.Ct. 954, 82 L.Ed. 1416 (1938); (b) collect claims against another state, which claims, prior to assignment, belonged to citizens of the prosecuting state, New Hampshire v. Louisiana, 108 U.S. 76, 2 S.Ct. 176, 27 L.Ed. 656 (1883); (c) recover for injury allegedly resulting from unlawful freight rates charged its citizen-shippers, Oklahoma v. A.T. & Santa Fe RR., 220 U.S. 277, 31 S.Ct. 434, 55 L.Ed. 465 (1911); and (d) enjoin alleged interference with interstate commerce resulting from state quarantine regulations, Louisiana v. Texas, 176 U.S. 1, 20 S.Ct. 251, 44 L.Ed. 347 (1900). An analysis of the above cases indicates that if a state is to maintain an action in its parens patriae capacity, initially the facts must show that the state has an interest "independent of and behind the titles of its citizens," Georgia v. Tennessee Copper Co., supra; "has an interest apart from that of the individuals affected," Pennsylvania v. West Virginia, supra; "must show a direct interest of its own and not merely seek recovery for the benefit of individuals who are the real parties in interest," Oklahoma v. Cook, supra; "[it] must appear that the controversy to be determined is * * * not a controversy in the vindication of grievances of particular individuals," Louisiana v. Texas, supra. Thus the state's parens patriae claim cannot be a disguised attempt to recover damages on behalf of the state's individual citizen-claimants. It is not a substitute for a class action under Rule 23, Fed.R. Civ.P. The two theories for recovery of damages are separate and distinct. (At this stage, we do not concern ourselves with the nature of proof.) So, here, the State in the guise of parens patriae cannot recover for the individual and several possible damage claims of its many citizen-consumers of petroleum products. As the preceding cases unmistakably set forth, and as the dissent in Georgia v. Pennsylvania R. Co., supra, points out: "[T]he inhabitants of the State who have suffered injury or who are threatened with injury by the unlawful practices alleged * * * are alone entitled to seek a legal remedy for their injury, and are the proper parties plaintiff in any suit to enforce their rights which are alleged to have been infringed. It has long been settled by the decisions of this Court that a State is without standing to maintain suit for injuries sustained by its citizens and inhabitants for which they may sue in their own behalf." 324 U.S. at 473, 65 S.Ct., at 733. The cases also make manifest a second prerequisite which must be met before a state may sue in parens patriae, viz., the state has standing to sue in that capacity only if a substantial portion of the inhabitants of the state are adversely affected by the challenged acts of the defendants. For example: "* * * [T]he interests of the single industry here involved must be held to be private interests, not interests affecting the whole economy or all the people of the state. This type of interest is insufficient to give Minnesota the right to sue as parens patriae in behalf of all, or a substantial number, of her citizens." Land O'Lakes Creameries v. Louisiana, 160 987 F.Supp. 387, 389. (Emphasis added.)[7] " * * [T]he mere fact that a state had no pecuniary interest in the controversy would not defeat the original jurisdiction of this court, which might be invoked by the state as parens patriae, trustee, guardian or representative of all or a considerable portion of its citizens * * ." Kansas v. Colorado, supra, at 99, 27 S.Ct., at 668. (Emphasis added.)[8] Thus, if a "substantial number", "or a considerable portion of [Hawaii] citizens" are adversely affected by the alleged acts of the defendants, Hawaii would have the requisite standing to sue as parens patriae on behalf of the totality of those citizens. While a state may not sue, parens patriae, for the recovery of possible individual damages or claims of its inhabitants, nevertheless if defendants' acts have a deleterious impact upon the general welfare or economy of the state, a state has standing to sue for both financial and injunctive relief in a parens patriae capacity. As was conceded by counsel and as this court would judicially notice, there are almost 300,000 motor vehicles operating in this state with approximately 800,000 inhabitants. If more facts were needed, in this State where the grass never ceases to grow, gasoline-powered lawn mowers are as thick as the proverbial fleas on a dog. These two categories, of course, do not cover all of the engines in Hawaii that are powered by petroleum products. The court would judicially notice that there is probably not a single industry nor more than an insignificant number of persons in Hawaii whose operations, life and livelihood are not connected in some way with, or affected by, the use of gasoline fuel and the other petroleum products referred to in the present complaint, and perforce therefore, the cost thereof. Hawaii meets each of the two primary requirements for a valid parens patriae cause of action and may maintain this suit as parens patriae, acting on behalf of her citizens.[9] There is no merit in defendants' claim that there can never be a parens patriae suit for damages; that such a suit lies only in equity and only for preventive relief. Georgia v. Pennsylvania R. Co., supra, unequivocally determines that Georgia was [and ergo Hawaii is] "a `person' entitled to enforce the civil sanctions of the anti-trust laws." (324 U.S. at 452, 65 S.Ct., at 723) The civil sanctions of the antitrust laws certainly include recovery of damages from violators thereof. As indicated earlier, the Court in denying Georgia the right to recover damages from the railroad, did so only because of the prior ruling of the Court in Keogh v. Chicago N. W. R. Co., supra, note 6. Keogh was also a suit for damages under Section 7 of the Sherman Act, 26 Stat. 210, wherein the Court determined that even though a rate-making conspiracy may have existed between the defendant railroads, nevertheless, for the purpose of a suit for damages, a rate, fixed by the Commission, until suspended or set aside, was for all purposes the legal rate as between shipper and carrier, and denied Keogh's antitrust action. Absent the impact of the Keogh decision, the only rational inference to be drawn from Georgia v. Pennsylvania R. Co., is that an antitrust suit for treble damages was properly pled by Georgia in its parens patriae capacity. Certainly the broad objectives of the antitrust statutes are not to be meanly or narrowly curtailed because it is a state that brings a damage claim thereunder, in a parens patriae capacity. 988 Although defendants urge that Count II "does not in fact allege any injury to the general economy of the State of Hawaii", this conclusatory argument is nullified by subparagraphs (c), (d), (e), (f) and (g) of paragraph 20 of plaintiff's complaint.[10] (See page 2, supra.) Defendants additionally argue that any possible recovery by the State under a parens patriae theory must be apart from any recovery for an injury to the business or property of the State in its proprietary capacity. Defendants continue that the antitrust statutes allow damages to be recovered only for injury to "business or property." 15 U.S.C. § 15. Their position is that an injury to the economy of the State cannot be an injury to the State's "business or property."[11] Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 27 S.Ct. 65, 51 L.Ed. 241 (1906), long ago said that a public body is injured in its "property" when it is forced to pay more for a commodity than it would absent a conspiracy. If the economy of a state can be injured, then that economy is finite and can fall within a definition of the word "property", even though it does not fall within the normal, simple definition of "business and property" under Section 4 of the Clayton Act. As indicated above, Georgia v. Pennsylvania R. Co. lays at rest defendants' semantic argument. It clearly there differentiated between suits for damages in the State's proprietary capacity and suits for damages in its quasi-sovereign capacity and held that damages to the State's economy, if proved, were recoverable as a distinct injury, severable from whatever injury it might suffer in its proprietary capacity.[12] There can be no risk of double recovery from the plaintiff for any single damage. As previously stated, a parens patriae action cannot be brought to recover the individual damages of the State's inhabitants. If the State cannot prove injury to the State's economy an injury completely severable from the injuries to its individual inhabitants, then of course it could recover no money damages. On this point, as well as in defendants' claim that an injury to the State's economy is of a nature too remote or speculative to be measurable in money damages (and cannot in any event be damages to a "state's business and property"), defendants move out of the area of pleading into the area of proof at trial. This case is at the pleading stage. Hawaii has pled a parens patriae cause of action that cannot be summarily dismissed. How it will prove its damage, what type of evidence will be offered, how the quantum of alleged damage is to be measured, are problems to be met in futuro, problems that will be dealt with at the proper time in the light of Southern Photo Materials, Storey Parchment Co., Bigelow, and Continental Ore.[13] Defendants' motion to dismiss Count II is denied. NOTES [1] Fourth Amended Complaint, Paragraph 19. [2] Fourth Amended Complaint, Paragraph 20. [3] Plaintiff's Count III pled a class action. Defendants' motion to dismiss this count was granted in an oral bench decision, after briefing and argument. [4] In plaintiff's Third Amended Complaint, the allegations of Count II flirted with the theory of a parens patriae claim, and on defendants' motion to dismiss, it was briefed by both plaintiff and defendants as if it had been properly alleged. This court in a prior Memorandum Decision found that a parens patriae claim had not been pleaded and dismissed the count with leave to amend. Thus, all parties were given two shots at the same target. [5] In its supporting brief (page 8) the State of Georgia indicated that it was "not primarily interested in seeking damages for past injuries to the State and her citizens, * * * [but in] the future welfare of the State and her people." [6] See Keogh v. Chicago & N. W. R. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922) and Marnell v. United Parcel Service, 260 F.Supp. 391, 406 (N.D.Cal. 1966). [7] See also Jones, Governor ex rel. Louisiana v. Bowles, 322 U.S. 707, 64 S.Ct. 1043, 88 L.Ed. 1551 (1944). [8] See also Kansas v. Colorado, 185 U.S. 125, 142, 22 S.Ct. 552, 46 L.Ed. 838 (1902) and Missouri v. Illinois & Sanitary District of Chicago, supra, at 241, 21 S.Ct. 331. [9] Georgia v. Tennessee Copper Co., supra; Missouri v. Illinois, supra; Pennsylvania v. West Virginia, supra. [10] Allegation (a) is most ambiguous and allegation (b) becomes intelligible only if the word "affect" is construed to mean "offset". See plaintiff's Count II, supra. [11] Defendants cite Highland Supply Corp. v. Reynolds Metals Co., 327 F.2d 725, 732 (8 Cir. 1964), as authority for the statement that the damage or injuries must be something different from that sustained by the community or general public. The words are convenient for defendants' argument, but the facts of that case have no application to the parens patriae problem before the court. [12] "But Georgia is not confined to suits designed to protect only her proprietary interests," and continued, "* * * we find no indication that, when Congress fashioned those civil [antitrust] remedies, it restricted the States to suits to protect their proprietary interests." 324 U.S. at 447, 65 S.Ct., at 721. (Emphasis added.) [13] Eastman Kodak v. Southern Photo Materials, 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927); Story Parchment Co. v. Patterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931); Bigelow v. RKO Pictures, Inc., 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946); Continental Ore v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962).	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1805317/	471 F.Supp. 546 (1978) Georgia S. GOODSON v. SEARLE LABORATORIES. Civ. No. N-76-376. United States District Court, D. Connecticut. October 23, 1978. 547 Leander Gray, New Haven, Conn., for plaintiff. Miles F. McDonald, Jr., Badger, Fisher, Cohen & Barnett, Greenwich, Conn., for defendant. RULING ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT ELLEN B. BURNS, District Judge. This is a products liability case involving the use of an oral contraceptive. On November 15, 1972, the plaintiff's physician issued to her a prescription for Demulen 21, a birth control pill, obtainable only by prescription. On November 19, 1973, she suffered a cerebrovascular accident which resulted in her partial blindness and some permanent loss of dexterity in her dominant hand. On November 18, 1976, the plaintiff filed the instant Complaint claiming that the defendant drug company's product was in a defective and unreasonably dangerous condition in that it contained an amount of estrogen sufficient to cause her stroke. She is asking one million dollars in damages, plus whatever other legal and equitable relief this Court may deem necessary and proper. On June 22, 1978, the defendant drug company pursuant to Rule 56 of the F.R. C.P. filed the present Motion for Summary Judgment. The defendant contends there is no material issue of fact that it warned the medical profession prior to plaintiff's use of Demulen of the risk of cerebral thrombosis associated with the use of Demulen, and further argues that the manufacturer of a prescription drug has a legal duty only to warn the physician, not the patient, as to the risks associated with the use of the drug. The defendant thus maintains it is entitled to a summary judgment as a matter of law. The plaintiff argues, on the other hand, that the defendant had a duty to warn all foreseeable users of the drug rather than just the prescribing doctor, and that the defendant's failure to adequately warn the plaintiff of the allegedly defective condition of the drug raises issues of material fact which cannot be decided as a matter of law. For the reasons discussed below, the defendant's Motion for Summary Judgment must be granted. Rule 56(c) of the F.R.C.P. provides that summary judgment shall be rendered in cases where there is no genuine issue as to any material fact and where the moving party is entitled to a judgment as a matter of law. In support of its Motion, the defendant has submitted a number of exhibits. These include extracts concerning Demulen from the Physician's Desk Reference supplement c/1970 (Ex. D),[1] the defendant's directions for Demulen's use, warnings to physicians as to its side effects and adverse reactions and package inserts (Ex. E),[2] and the affidavit of the prescribing physician stating that he was aware of the risk of cerebral thrombosis claimed to be associated with the use of all hormonal oral contraceptives, including Demulen, from his reading of medical journal articles, package inserts and the Physician's 548 Desk Reference and discussions with colleagues (Ex. A). Nowhere in her Memorandum opposing the defendant's Motion does the plaintiff claim that the defendant did not in fact warn the medical profession and the prescribing physician. And, indeed, given the exhibits filed by the defendant, this Court is compelled to find there is no issue of material fact that the defendant warned the medical profession and the prescribing doctor prior to the plaintiff's use of the risk of cerebral thrombosis associated with the use of Demulen. Even were the warning found to be inadequate as to the medical profession as a whole, it is clear that the physician who prescribed Demulen for the plaintiff had been adequately warned of the increased risk of thromboembolic disease associated with its use. Once the existence of this material fact has been established, the next question is whether the defendant is consequently entitled to a judgment as a matter of law. It is the position of the defendant that the manufacturer of a prescription drug has a duty to warn the physician, not the patient. The leading opinion in this Circuit in this area is that of Circuit Judge J. Joseph Smith in Basko v. Sterling Drug, Inc., 416 F.2d 417 (1969). There Judge Smith noted that the Connecticut Supreme Court has adopted the strict liability position taken by § 402A of the Restatement (Second) of Torts, and went on to reason: While § 402A imposes strict liability on the seller who markets a product "in a defective condition unreasonably dangerous" to the consumer, comment k makes an exception to the strict liability rule in the case of products characterized as "unavoidably unsafe." These include "products which, in the present state of human knowledge, are quite incapable of being made safe for their intended and ordinary use," and they are "especially common in the field of drugs." . . . Although the imposition of strict liability for the idiosyncratic side effects of a drug is certainly not unthinkable, comment k provides that such a drug is neither "defective" nor "unreasonably dangerous" in the § 402A sense if the manufacturer gives an adequate warning of the risks involved. In this respect, comment k simply adopts the ordinary negligence concept of duty to warn. If proper warning is given "where the situation calls for it," the manufacturer is "not to be held to strict liability for unfortunate consequences . . . merely because he has undertaken to supply the public with an apparently useful and desirable product, attended with a known but apparently reasonable risk." Restatement (Second) of Torts § 402A comment k. . . . In the case of prescription drugs, the manufacturer can fulfill its duty to warn by warning the medical profession of the side effects of the drug. "In such cases the choice involved is essentially a medical one involving an assessment of the medical risks in the light of the physician's knowledge of his patient's needs and susceptibilities. Further it is difficult under such circumstances for the manufacturer, by label or direct communication, to reach the consumer with a warning. A warning to the medical profession in such cases is the only effective means by which a warning could help the patient." Davis v. Wyeth Laboratories, Inc., 399 F.2d 121, 129 (9th Cir. 1968). Basko, supra, at 425-26. The rule that a drug manufacturer has a duty to warn the doctor rather than the patient was more recently spelled out in the case of Chambers v. G. D. Searle & Co., 441 F.Supp. 377 (D.Md.1975), affirmed per curiam, 567 F.2d 269 (4th Cir. 1977). That case also involved an action against the manufacturer of an oral contraceptive to recover for injuries sustained as a result of a stroke allegedly caused by the plaintiff's ingestion of the contraceptive pills. There the District Court Judge noted: The standard of negligence in a case of this sort is somewhat different from that presented in the ordinary negligence case. First of all, this case concerns a prescription drug which is regulated by federal law. See 21 U.S.C. § 353(b)(1)(C). Thus, the drug can be used only under the *549 professional supervision of a doctor licensed by law to administer the drug. Accordingly, it is quite clear that the warning which must be examined here is that given to the physician and not that given to the user. See Sterling Drug, Inc. v. Cornish, 370 F.2d 82 (8th Cir. 1966). As the Eighth Circuit said in that case, "the purchaser's doctor is a learned intermediary between the purchaser and the manufacturer." . . . A drug company is not an insurer with respect to the product with which it deals. O'Hare v. Merck & Co., 381 F.2d 286, 291 (8th Cir. 1967). Chambers, supra, at 381. As is made clear by the exhibits attached to the defendant's instant Motion, for several years prior to the plaintiff's use of Demulen the defendant had disseminated uniform information and warnings concerning the use of the drug and the risk of cerebral thrombosis. All of this material had been reviewed and approved by the Federal Drug Administration. In Brick v. Barnes-Hines Pharmaceutical Co., Inc., 428 F.Supp. 496 (D.C.D.C. 1977), summary judgment was granted the defendant drug manufacturer where the plaintiff fell victim to a previously established side effect included in the drug's FDA approved warnings issued by the defendant. And in Pierluisi v. E. R. Squibb & Sons, Inc., 440 F.Supp. 691, 694, 695 (D.P.R. 1977), summary judgment was granted the defendant drug manufacturer where it was shown the prescribing physician was aware of the adverse side effects of a prescription drug through warnings in package inserts and the Physician's Desk Reference. See also Dunkin v. Syntex Laboratories, Inc., 443 F.Supp. 121 (W.D.Tenn.1977). This Court concludes that, given the legal duty of the defendant drug manufacturer to warn the prescribing physician rather than the patient of the risks inherent in the use of its product, and in light of the evidence of the warnings which the defendant gave the medical profession and the plaintiff's prescribing doctor concerning the risk of cerebral thrombosis inherent in the use of the drug Demulen, the defendant is entitled to summary judgment as a matter of law. The defendant's Motion for Summary Judgment is therefore granted. SO ORDERED. NOTES [1] Exhibit D makes special note that "[a]n increased risk of thromboembolic disease associated with the use of hormonal contraceptives has now been shown in studies conducted in both Great Britain and the United States" and gives special warning that "[t]he physician should be alert to the earliest manifestation of thrombotic disorders . . . Retrospective studies of morbidity and mortality conducted in Great Britain and studies of morbidity in the United States have shown a statistically significant association between . . . cerebral thrombosis . . . and the use of oral contraceptives." It further states that "[a] statistically significant association has been demonstrated between use of oral contraceptives and . . . cerebral thrombosis." [2] Exhibit E repeats in the directions and warnings to physicians the same special note, warning and statement with respect to significant association between the use of oral contraceptives and cerebral thrombosis. The package insert advises the user not to take the drug "without your doctor's continued supervision" and continues "The oral contraceptives are powerful and effective drugs which can cause side effects in some users and should not be used at all by some women. The most serious known side effect is abnormal blood clotting which can be fatal"	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1814898/	433 F.Supp. 605 (1977) Johnnie L. FRANCIS, Robert L. Martin, John L. Hughley, Cornell L. Conroy, and the National College of Business v. Max CLELAND, Administrator, Veterans Administration, A. H. Thornton, Director, Veterans Administration Center. No. Civ 76-5085. United States District Court, D. South Dakota. June 25, 1977. 606 607 James P. Hurley, Rapid City, S. D., for plaintiffs. David V. Vrooman, U. S. Atty., Sioux Falls, S. D., for defendants. 608 MEMORANDUM OPINION BOGUE, District Judge. I. This action was commenced by four armed forces veterans and an educational institution which enrolls veterans. Plaintiffs' theory is simply that the challenged sections of the Veterans' Education and Employment Act of 1976 conflict with the federal Constitution; hence, they ought be declared null and void and defendants ought be enjoined from enforcing them. II. Plaintiffs filed their complaint asking for injunctive relief on December 31, 1976. On December 31, 1976, this Court entered a temporary restraining order enjoining defendants from enforcing the challenged sections as they applied to these plaintiffs. A hearing on the application for a preliminary injunction was set for January 17, 1977. At said hearing plaintiffs came forward with evidentiary matter (some witnesses and many exhibits) by which they tried to establish the prerequisites for continuing injunctive relief. Plaintiffs at that hearing asked for additional time to present evidence. Defendants argued vigorously that the taking of any evidence was of no possible benefit as the only thing then before the Court was a legal question; namely, whether or not the challenged pieces of legislation were rationally related to some legitimate governmental objective. Their point was well taken insofar as their motion to dismiss raised a purely legal question. However, as to whether or not continued injunctive relief was proper, this Court determined that it would be most fair to everyone to continue the hearing until the earliest convenient moment at which time each party would have opportunity to put in whatever evidence seemed material and relevant. The restraining order was left in effect pending further order of the Court and February 7, 1977, was set for the next hearing date. On February 7, 1977, plaintiffs put in some evidence and defendants put on one witness. This Court then denied defendants' motion to dismiss. Defendants had moved earlier to consolidate the hearing on the application for preliminary injunctive relief with the hearing on the merits; and there being no opposition to such consolidation motion, defendants' motion was granted. Subsequently, plaintiffs moved for leave to file an amended complaint stating that they wanted to amend to conform to the evidence submitted. Leave was granted. An amended complaint was thereupon filed. Plaintiffs also filed a motion to reopen which this Court denied. Defendants moved to dismiss the amended complaint and also moved in the alternative for summary judgment. Briefs are all in, and the case is in a posture for final disposition on the merits. III. Plaintiffs allege that jurisdiction exists under 28 U.S.C. § 1331 and under 28 U.S.C. § 1361. It appears from the briefs that defendants are not making an issue of jurisdiction. We think plaintiffs' reliance upon 28 U.S.C. § 1331 is well-placed, and proceed on the theory that a federal question has been presented. Although plaintiffs allege damages in excess of $10,000.00, we make no finding as to the monetary amount in dispute. We deem it sufficient to note that 28 U.S.C. § 1331(a) as amended by Public Law 94-574, section 2, provides that no jurisdictional amount is necessary in any action predicated on § 1331 and brought "against the United States, any agency thereof, or any officer or employee thereof in his official capacity." IV. This lawsuit presents a challenge to three specific provisions of the Veterans Education and Employment Act of 1976. These are: (A) Section 205(d) of Public Law 94-502 which amends 38 U.S.C. § 1673(d); 609 (B) Section 509(b) of Public Law 94-502 which amends 38 U.S.C. § 1789; and (C) Section 307 of Public Law 94-502 as it amends 38 U.S.C. § 1724. The changes made by each of these amendments will be outlined separately. A. Title 38 U.S.C. § 1673(d) embodies what is commonly known as the 85-15 rule. The Administrator is directed to disapprove a veteran's enrollment in any course for which he is not already enrolled if more than 85 percent of the students enrolled in that course are subsidized in whole or in part by the federal government or the educational institution itself. Disapproval would mean, of course, that G.I. Educational Benefits would not be paid unless the veteran found some approved courses. Thus the 85-15 rule is an attempt to force upon courses a market test; i. e. the theory behind the legislation is that if a course can attract a certain percent of paying students, then it is probably less likely to be a gimmick to attract veterans' dollars and more likely to be a quality course. Prior to the amendment of 1976, 38 U.S.C. § 1673(d) read in relevant part as follows: (d) The Administrator shall not approve the enrollment of any eligible veteran, not already enrolled, in any course which does not lead to a standard college degree and which is offered by a proprietary profit or proprietary nonprofit educational institution for any period during which the Administrator finds that more than 85 per centum of the students enrolled in the course are having all or part of their tuition, fees, or other charges paid to or for them by the educational institution or the Veterans' Administration under this title. Subsequent to the amendment of 1976, § 1673(d) reads in relevant part: The Administrator shall not approve the enrollment of any eligible veteran, not already enrolled, in any course . . . for any period during which the Administrator finds that more than 85 per centum of the students enrolled in the course are having all or part of their tuition, fees, or other charges paid to or for them by the educational institution, by the Veterans' Administration under this title and/or by grants from any Federal agency. The significance of this 1976 amendment to § 1673 is twofold: (1) the section is extended to cover courses not previously covered, and (2) the allowable composition of the 85 percent group (which may be subsidized in one form or another) is altered. Prior to the 1976 amendment the 85-15 rule pertained to courses offered by proprietary profit and proprietary nonprofit educational institutions if the courses led to something less than a standard college degree. The latest amendment extends the 85-15 rule to courses offered by public, tax-supported schools as well as to courses of other institutions not supported by taxes even if the courses, at either type of school, lead to a standard college degree. In effect, § 205(d) of P.L. 94-502 extends the 85-15 rule to courses offered by all institutions of higher learning, the rest of the "educational universe." (Wolowitz, T273) The second change in § 1673 is more significant for the present lawsuit. Under the law before the 1976 amendment the computation of 85 percent of the students, which could permissibly be subsidized in any course, was done without reference to students receiving federal grants other than veterans' benefits. As of December 1, 1976, the 85 percent must be computed differently. Students receiving aid from any federal agency or from the school itself are all thrown over into the potential 85 percent category; hence, at least 15 percent of the students enrolled in a course must be financed by their own resources, parents or some source other than the educational institution or the federal government. B. Title 38 U.S.C. § 1789 embodies what is commonly referred to as the two-year rule. The two-year rule means basically that the Administrator is required to disapprove a veteran's enrollment in courses 610 (hence his benefits) if the course has not yet been offered for two years. Some exceptions are allowed. The theory is the same as that underlying the 85-15 rule; namely, to force a course to survive a market test before G.I. Bill dollars start supporting it. Prior to the amendment of 1976, 38 U.S.C. § 1789 stated as follows: § 1789. Period of Operation for approval. (a) The Administrator shall not approve the enrollment of an eligible veteran or eligible person in any course offered by an educational institution when such course has been in operation for less than two years. (b) Subsection (a) shall not apply to (1) any course to be pursued in a public or other tax-supported educational institution; (2) any course which is offered by an educational institution which has been in operation for more than two years, if such course is similar in character to the instruction previously given by such institution; (3) any course which has been offered by an institution for a period of more than two years, notwithstanding the institution has moved to another location within the same general locality, or has made a complete move with substantially the same faculty, curricula, and students, without change in ownership; (4) any course which is offered by a nonprofit educational institution of college level and which is recognized for credit toward a standard college degree; or (5) any course offered by a proprietary nonprofit educational institution which qualifies to carry out an approved program of education under the provisions of subchapter V or VI of chapter 34 of this title (including those courses offered at other than the institution's principal location) [38 USCS §§ 1690-1693 or 1695-1697A] if the institution offering such course has been in operation for more than two years. (Oct. 24, 1972, P.L. 92-540, Title III § 316(2), 86 Stat. 1087.) Subsection (a) set out a general rule, and subsection (b) provided several exceptions to the rule. The new law cuts back on exceptions by qualifying subsection (b). Subsection (b) is qualified by a new subsection (subsection (c)) which states: Notwithstanding the provisions of subsection (b)(1), (2), (3), or (4) of this section, the provisions of subsection (a) shall apply to any course offered by a branch or extension of (1) a public or other tax-supported institution where the branch or extension is located outside of the area of the taxing jurisdiction providing support to such institution; or (2) a proprietary profit or proprietary nonprofit educational institution where the branch or extension is located beyond the normal commuting distance of such institution. This legislation extends the two-year rule to courses not heretofore covered, i. e. certain courses offered by public tax-supported institutions and certain courses offered by private schools even though the courses are recognized for credit toward a standard college degree. Public schools may offer courses in branches or extensions anywhere within their taxing jurisdiction without having veterans who enroll in them be subject to the two-year rule. Other schools can branch out within commuting distance (25 or 30 miles according to testimony) without triggering the two-year rule for veterans who enroll in courses offered at such a branch or extension. C. Title 38 U.S.C. § 1724 is aimed at an objective different from that underlying the 85-15 and two-year rules. While the latter two rules attempt to insure quality courses, § 1724 attempts to insure that the enrolled veteran actually does something constructive while he is in school. Section 1724 attempts to insure that each veteran, instead of merely enjoying the academic environment, makes definite progress toward an educational goal. Prior to the 1976 amendment, 38 U.S.C. § 1724 read as follows: 611 The Administrator shall discontinue the educational assistance allowance on behalf of an eligible person if, at any time, the Administrator finds that according to the regularly prescribed standards and practices of the educational institution he is attending, his conduct or progress is unsatisfactory. The Administrator may renew the payment of the educational assistance allowance only if the Administrator finds that (1) the cause of the unsatisfactory conduct or progress of the eligible person has been removed; and (2) the program which the eligible person now proposes to pursue (whether the same or revised) is suitable to the person's aptitudes, interests, and abilities. One qualifying sentence has now been added and it states: Unless the administrator finds there are mitigating circumstances, progress will be considered unsatisfactory at any time an eligible person is not progressing at a rate that will permit such person to graduate within the approved length of the course based on the training time as certified to the Veterans' Administration. In essence, the Congress set out to define "unsatisfactory progress." In doing so, time limits will be set insofar as a course of study will have an approved length; deviation will be regarded as dereliction and benefits will be withdrawn. V. As stated earlier, each of the three enumerated sections of the Veterans' Education and Employment Act of 1976 is challenged on the theory that each conflicts with one or more of the amendments to the United States Constitution. Preliminary to an in-depth analysis of such claim, it is essential to resolve the issue of which of these plaintiffs, if any, has brought a concrete case or controversy rather than an abstract question of law to this Court, i. e. who, if anyone, is so situated that he has standing to make these challenges. VI. The standing issue necessitates two separate levels of inquiry; indeed, as the United States Supreme Court has recently observed when a standing issue was raised: [T]wo distinct standing questions are presented. . . . and they are these: first, whether the plaintiff-appellees allege "injury in fact," that is, a sufficiently concrete interest in the outcome of their suit to make it a case or controversy subject to a federal court's Art. III jurisdiction, and second, whether as a prudential matter, the plaintiff-appellees are proper proponents of the particular legal rights on which they base their suit. (Emphasis added.) Singleton v. Wulff, 428 U.S. 106, 112, 96 S.Ct. 2868, 2873, 49 L.Ed.2d 826 (1976) citing Data Processing Service v. Camp, 397 U.S. 150, at 152-153, 90 S.Ct. 827, at 829, 25 L.Ed.2d 184 (1979); Flast v. Cohen, 392 U.S. 83, 99, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947 (1968); and Barrows v. Jackson, 346 U.S. 249, 255, 73 S.Ct. 1031, 1034, 97 L.Ed. 1586 (1953) wherein the two separate criteria for standing are distinguished. The issue of standing having been contested by defendants, we deem it proper at this point not only to examine plaintiffs' allegations, but also to determine as matters of fact whether plaintiffs meet the standing requirements set out in Singleton v. Wulff. A. The requirement of injury in fact is based on the Art. III requirement of a case or controversy; Data Service Processing v. Camp, supra. Without injury in fact there can be no case or controversy in the constitutional sense. The injury need not necessarily be economic. Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972); United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973) (hereinafter SCRAP). Neither the degree of harm nor the significance of the grievance are required to be quantitatively measured when a court examines the first element of the standing test. SCRAP, 93 S.Ct. at 2417, n.14. 612 Nevertheless, a plaintiff must allege and, if the point is controverted, must prove that some concrete injury has either been inflicted upon him or will immediately be inflicted upon him if the Court does not protect him. 1. Plaintiff Johnnie Francis, after his discharge from the United States army, tried several business ventures which failed. Mr. Francis was advised that his business prospects would be improved if he obtained some business training, so with that purpose in mind he enrolled at the National College of Business (hereinafter N.C.B.). He studied for six quarters and drew G.I. educational benefits during that time. At the time of Mr. Francis' testimony in court, he was not enrolled, but had reapplied. He had no idea whether he had been accepted or not, but was definitely operating on the assumption that the 85-15 rule was somehow a barrier to the continuation of his business education. Plaintiffs produced no evidence, however, to show that Johnnie Francis' enrollment in any particular course would be disapproved by the Administrator on the basis of the 85-15 rule or the two-year rule. The effect of the new law has not been linked to the situation of Johnnie Francis. He has some vague apprehensions, but no injury in fact. To assert that injury to him would likely occur would be, on this record, pure conjecture. We must conclude, therefore, that Johnnie Francis has not presented a concrete case or controversy and has no standing to challenge 85-15 or the two-year rule. Not being enrolled, he is assuredly in no position to challenge 38 U.S.C. § 1724, the progress requirement. 2. Plaintiff Cornell L. Conroy is presently enrolled at N.C.B. and is drawing G.I. educational benefits. The modified 85-15 rule and the modified two-year rule do not apply to a course in which a veteran is already enrolled. At present Mr. Conroy is even more removed from injury in fact traceable to these rules than is Johnnie Francis. We must hold therefore that Cornell Conroy has no standing to challenge either 85-15 or the two-year rule. With respect to 38 U.S.C. § 1724, however, his position must be viewed differently. That section could rightfully be challenged, not by someone hoping to enter a course of study, but rather by someone hoping to remain in a course of study when his progress was judged unsatisfactory. If there were evidence tending to show that Mr. Conroy was not progressing toward his goal within the time limits approved by the Administrator, then he would be an ideal plaintiff to challenge 38 U.S.C. § 1724. As the record stands now, we have no evidence that Mr. Conroy is progressing less rapidly than N.C.B. or the Veterans Administration thinks he ought. We have no evidence whatever that his benefits might be terminated for failure to progress rapidly enough; hence, as to 38 U.S.C. § 1724 we must also conclude that Mr. Conroy has no standing to sue because he has neither alleged nor proved injury in fact. 3. Plaintiff Robert L. Martin is on active duty in the United States Air Force. He was enrolled part-time at N.C.B. in 1976; he dropped out sometime in September and has not applied for re-enrollment at any N.C.B. branch. Presently, this plaintiff is seeking an early separation (he still has approximately twenty-two months active duty) and hopes to return to his home in Baldwin City, Kansas, where he would be able to attend the Shawnee Mission branch of N.C.B. Because the Shawnee Mission extension, at the time of the hearing, had not yet been in operation for two years, the contemplated move could put Mr. Martin into a position in which he would be out of the Air Force but would not be able to get G.I. educational benefits for attendance at Shawnee. We have no evidence that the early separation will occur, however, and Mr. Martin has not even made inquiries as to whether he could be admitted to the Shawnee Mission branch of N.C.B. A concrete case or controversy concerning 85-15 and the two-year rule is lacking and standing to challenge those sections 613 must be denied. For the reasons discussed in Mr. Francis' case, this plaintiff has no standing to challenge 38 U.S.C. § 1724. 4. Plaintiff John L. Hughley did not testify at the hearing; accordingly, his position must be sketched from the uncontroverted assertions of his affidavit. He enrolled at N.C.B. in 1975, it is implied in the affidavit that he is still enrolled there, and he expresses grave concern about his future if his educational benefits are cut off. As with Cornell Conroy, some change in his situation would have to occur before the 85-15 rule or the two-year rule would pose any threat to his benefits. Having no evidence that such a change is imminent, we can only conclude that plaintiff Hughley has alleged no injury in fact and consequently has no standing to challenge the 85-15 rule or the two-year rule. For the reasons stated in our discussion of Mr. Conroy's situation, we likewise conclude at this point that John L. Hughley has no standing to challenge 38 U.S.C. § 1724. 5. N.C.B. is a nonprofit South Dakota corporation engaged in the business of higher education. John W. Hauer, president of N.C.B., testified at length about the programs offered by N.C.B., the investments made for the education of veterans and the immediate injury that would occur if the temporary restraining order were lifted. According to his testimony, investments in programs designed for the education of veterans is substantial; at least $680,000 has been invested in programs specifically designed to meet the needs of veterans. Veterans' responses have been good; consequently, the night school program in Rapid City and the courses at most of the branches are filled mostly by veterans. Mr. Hauer testified that the situation of N.C.B. was such that application of the 85-15 rule would immediately put in jeopardy each and every program run by the school with two possible exceptions: the day school program in Rapid City and the program offered at a branch in Phoenix, Arizona. His testimony relating to the effect of the two-year rule was similar to his testimony about the 85-15 rule. Because seven of N.C.B.'s thirteen extensions were, at the time of the hearing, less than two years old, it is plain that courses offered at these branches could not be approved for veterans. It was admitted, of course, that the extensions are all beyond commuting distance from the main campus in Rapid City. From the record this Court finds with reference to N.C.B.: this educational institution has a great financial investment in the education of the veterans and, if 85-15 and the two-year rule, or either, is applied to N.C.B., direct and immediate economic injury will occur. We conclude on the basis of these findings that the first half of the standing test has been passed by N.C.B. Insofar as N.C.B. seeks to challenge 85-15 and the two-year rule. N.C.B. has, however, produced on the record no evidence of any injury caused by or likely to be caused by the application of 38 U.S.C. § 1724. In regard to that section, the first requirement for standing is missing and standing to press that claim will, accordingly, be denied. B. Having found injury in fact in regard to N.C.B., a more difficult issue must be confronted; namely, whether N.C.B. is the proper proponent of the particular legal rights upon which the suit is based. The lawsuit is based upon several legal rights among which are: (1) the right to due process of law, (2) the right to equal protection of the law,[1] (3) the freedom (right) of association, (4) the right to travel, and (5) the right of privacy. Plaintiff N.C.B. also claims that the challenged legislation is: (6) an unlawful delegation of power, and (7) that it allows unlawful federal control of a private educational institution. 614 With the possible exception of the last claim, supra, these asserted rights are not asserted to be rights of N.C.B. which are being violated by the new veterans' bill. In the well-pleaded amended complaint, plaintiffs plainly assert that the rights being violated are veterans' rights, not the rights of the institutional plaintiff. We are faced then with a peculiar dilemma: the rights asserted are those of veterans, but the only imminent injury we have found at this point is the threat of financial ruin for N.C.B. The question, therefore, is whether or not N.C.B., as an institution which provides services to veterans, can couple its potential injury with the veterans' constitutional rights and thereby become a proper proponent of the legal rights upon which the lawsuit is based. This Court has concluded that N.C.B. can properly link its injury with the students' rights and thereby gain standing in federal court. The key is the jus tertii concept which has recently been applied in Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976) and was explained in greater detail in Singleton v. Wulff, supra. It is a general rule that federal courts will not resolve controversies on the basis of the rights of third persons not parties to the lawsuit. Barrows v. Jackson, 346 U.S. at 259, 73 S.Ct. at 1036 (1953). The rule, however, has an exception. A litigant will be allowed to invoke the jus tertii doctrine, allowing him standing on the basis of the third person's rights, when two specific factual determinations are made. First, it must be determined that the litigant's activity is so bound up with the right of the third person that the litigant will be directly affected by the outcome of the suit, and is so situated as to become fully, or nearly, as effective an advocate as the person whose rights are asserted. Thus the nature of the relationship is crucial. Singleton v. Wulff, supra. Second, there must exist a genuine obstacle that prevents the third party from being the most effective proponent of his own rights. In this situation that party in court becomes, as by default, the best advocate. Singleton v. Wulff, supra. The case before the Court presents a situation to which the jus tertii concept is applicable. The relationship between N.C.B. and veterans is definitely such that the litigants' activities (education) are inextricably bound up with the veterans' rights. N.C.B. is in a position to be a very effective advocate for veterans' rights. Moreover, there is definitely an obstacle that prevents veterans from effectively asserting their rights. In Singleton v. Wulff the Supreme Court recognized "imminent mootness" as an obstacle. In this suit, there is the obstacle posed by the converse of the mootness doctrine, i. e. ripeness. A student would not have a ripe controversy unless a course were disapproved. If he commenced a lawsuit at that point, the educational opportunity would no doubt be gone by the time a final decision was made. Thus, as a practical matter, a veteran who actually needs the V. A. funds for school at a special point in time has little chance of challenging any legislation. This Court concludes, therefore, that N.C.B. has standing to sue and advocate the rights of veterans on the basis of the jus tertii doctrine. Though not always labeled as applications of the jus tertii doctrine, the principle itself has a long history, In 1927 in Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070, the Supreme Court recognized the standing of two private schools to assert the constitutional rights of their students and the students' parents when such rights were being deprived by a state statute requiring universal attendance at public schools. The schools combined their economic injury and the students' constitutional rights to get standing in federal court. See also Barrows v. Jackson, 346 U.S. 249, 73 S.Ct. 1031, 97 L.Ed. 1586, wherein Supreme Court recognized the standing of an owner of real property subject to a restrictive covenant to sue on the basis of the constitutional rights of a third party purchaser; Akron Board of Education v. State Board of Education of Ohio, 490 F.2d 1285 (1974) cert. denied 417 U.S. 932, 94 S.Ct. 2644, 41 L.Ed.2d 236, 615 wherein the Sixth Circuit recognized that a municipal school board and its superintendent had standing to assert the constitutional rights of the district's children; and Singleton v. Wulff, supra, wherein physicians challenging a state law prohibiting Medicaid payments for non-therapeutic abortions gained standing because the doctors showed that their economic injury and their patients' constitutional rights were inextricably intertwined. Most recently in Craig v. Boren, supra, the Oklahoma beer vendor was allowed standing by coupling the constitutional rights of Oklahoma males between the ages of 18 and 21 with the constriction of the plaintiff's market caused by the challenged statute that prohibited sale of 3.2 beer to males of that age bracket. Again, the litigants' economic injury coupled with the third party's constitutional rights in a particular relationship was sufficient to provide standing to sue in federal court. VII. Several theories have been advanced by plaintiffs to support the contention that 85-15 and the two-year rule are unconstitutional. Plaintiffs have urged with particular vigor that 85-15 and the two-year rule violate their right to equal protection of the laws; and as this Court perceives the issues, plaintiffs' most meritorious arguments have been those based upon an equal protection theory. Therefore, this Court elects to first examine the claims urged in light of the equal protection doctrine insofar as it is incorporated into the due process clause of the fifth amendment. We begin with the assumption that the due process clause of the fifth amendment incorporates the general principle of equal protection; namely, that persons similarly situated should be treated similarly. See e. g. Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884 (1954); U. S. Dept. of Agriculture v. Moreno, 413 U.S. 528, 93 S.Ct. 2821, 2825 n. 5, 37 L.Ed.2d 782 (1973). The standards to be used for testing the constitutionality of federal classifications under the fifth amendment are virtually identical to the standards to be used in determining whether or not a state classification violates the equal protection clause of the fourteenth amendment. Frontiero v. Richardson, 411 U.S. 677, 93 S.Ct. 1764, 36 L.Ed.2d 583 (1973). Our primary task is to ascertain what standards ought to be applied to test the classifications made by the challenged legislation. The law of equal protection has changed greatly over the past century, and in recent years this particular branch of the law has evolved very rapidly to cover dimensions of our social, political and economic life which were heretofore beyond the ambit of equal protection. There does not at present appear to be unanimous agreement among the members of the Supreme Court as to the state of the law of equal protection. See e. g. Craig v. Boren, supra, where Justices Stewart, Blackmun, Powell and Stevens each wrote separate, concurring opinions and the Chief Justice and Justice Rehnquist wrote separate, dissenting opinions. This Court is obliged to search the case law and reason by analogy to reach a just result here. We readily admit that we are plowing new ground in an era when some of the old reference points are tending to fade away. VIII. The traditional approach to equal protection questions was to apply the standard set out in Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78-79, 31 S.Ct. 337, 55 L.Ed. 369 (1911). The essence of that test is that legislation must be reasonable, not arbitrary or capricious, in making classifications among persons. Under the Lindsley approach, a challenged classification will be sustained if any state of facts can reasonably be conceived in support of it. One challenging a classification bears the burden of showing that it is arbitrary. The prevailing and continuing concept of the traditional approach has been that of "rational relationship" or "substantial and fair relationship" between a legitimate, governmental objective (easy to postulate) 616 and a specific piece of legislation. The very nature of the concept allows for flexibility and adaptability; it also allows for easy judicial abdication. Thus, almost anything can pass the most minimal level of scrutiny which is allowable within the concept of rational relationship. To apply this minimal level of review to the present lawsuit, the reasoning process must be as follows: (1) establish the purpose of the legislation; (2) examine the nature of the class created; and then (3) make inquiry to determine how, if at all, the two are linked together by reason. The purpose of the legislation (both 85-15 and the two-year rule) is plain to this Court. As stated earlier in this opinion, both laws are an attempt to insure that veterans enroll in quality courses if federal dollars are going to help support those courses. Conversely, it can be said that the purpose of these laws is to prevent charlatans from grabbing the veteran's education money. These are the immediate, remedial goals of the legislation. As remedial measures they are intended to advance the ultimate goal of the legislation giving veterans educational benefits, the goal of helping veterans individually to improve themselves and their lot in society. During the hearings some effort was directed toward demonstrating that there was no rational relationship between the problem of recouping overpayments to veterans and the 85-15 and two-year rules. That is certainly true, but as the government pointed out, 85-15 and the two-year rule are aimed at another problem entirely; specifically, the problem of insuring quality education. For our purposes, overpayments are irrelevant. We must consider the link, if any, between the classifications made by the laws and the remedial purposes of those laws. The classification complained of in this lawsuit is the classification of veterans receiving educational benefits apart from all other persons receiving federal funds to subsidize their educations. The 85-15 rule and two-year rule will under no circumstances operate to the detriment of individuals going to school on federal funds other than V. A. benefits. In short, there is a different treatment of persons based upon the type of federal subsidy for education which they receive. The crux of the problem is in determining whether or not veterans and non-veterans getting federal money for education under different programs are really similarly situated. We conclude that they are. All are beneficiaries of one and the same thing: social legislation that is aimed at raising the educational level and hence the opportunities and capacities of a certain segment of the populace. In either case we are dealing with governmental largess. cf. C. A. Reich, "The New Property," 73 Yale Law Journal (1964). V. A. benefits have been called gratuities. Milliken v. Gleason, 332 F.2d 122, 123 (1st Cir.1964), cert. denied 379 U.S. 1002, 85 S.Ct. 723, 13 L.Ed.2d 703 (1965). Veterans' educational benefits are a statutory entitlement as are benefits created by other social legislation, and we can see no reason in this case to distinguish them from other types of benefits under different names that subsidize higher education. By treating V. A. benefits as governmental largess, however, this Court does not imply that recipients have no protected interest whatever in their continuation. We have, therefore, a class of persons who are recipients of government largess for the purpose of furthering their education; within that class the recipients of one particular type of largess are singled out for special treatment. Congress has made a special class out of veterans receiving government funds for higher education in an effort to shield and protect every member of that class from abuses perpetrated upon them by unscrupulous recruiters who would otherwise entice them to enroll in substandard courses. Under the minimum requirements of the rational relationship test discussed, supra, can this classification pass muster? We must ask whether any state of facts reasonably may be conceived to justify the discrimination. McGowan v. Maryland, 366 U.S. 420, 81 S.Ct. 1101, 6 L.Ed.2d 393 (1961). 617 Using that formulation of the applicable law, the answer to the question posed is necessarily affirmative. All that is required are two assumed facts. First, one must assume that the market test really does work in education in the manner in which Congress apparently believes it does; in other words, courses at least two years old will be safer (of higher quality) than new courses, and courses where friends, relatives or students pay the total cost for at least 15 per cent of enrollees will be of higher quality than courses supported almost exclusively by veterans. Second, one must assume that veterans will be more gullible or more prone to abuse their benefits than other beneficiaries of government largess. On those two assumptions alone, a bridge of reasonable relationship can be built between the classification created by the legislation and the purpose to be achieved by the legislation. If the minimum level of review available under the rational relationship test is the applicable standard of review in this case, plaintiffs ought to be sent home empty-handed. We have not done so for the reason that we believe something more is required; the standard of review to be applied must be more intense than that heretofore discussed. IX. The traditional test for reviewing equal protection questions has been refined and developed by the United States Supreme Court in two respects: (1) A statutory classification based upon suspect criteria will be in jeopardy unless the state (government) can demonstrate a compelling interest as justification for said classification; (2) A classification affecting fundamental rights will likewise be in serious trouble unless a compelling governmental interest is demonstrated. It is quite apparent that the classification complained of in this case is by no stretch of the imagination "suspect". Veterans as a class have no history of deprivation of rights by reason of their status as veterans. The consequences of being classified as veterans do not approach the consequences of classification by race, which is the only classification which can be termed "suspect" with any certainty. See Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971); cf. Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971). The Supreme Court has declined to hold that education is a fundamental right. San Antonio School Dist. v. Rodriguez, 411 U.S. 1, 93 S.Ct. 1278, 36 L.Ed.2d 16 (1973). That being the state of the law, we cannot proceed to assert that monetary benefits for higher education are a fundamental right; hence, the strict scrutiny test is not triggered by an alleged deprivation of education benefits. It is noted that plaintiffs also contend that the fundamental right of interstate travel is impinged upon. On the basis of Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969), and Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972), they contend that this fundamental right must not be restricted in any manner, and on the basis of the right to travel they would have us invoke the strict scrutiny test. We have considered this idea and find it to be without merit. No one could seriously argue that the right to interstate travel is less than fundamental. Before making any strict scrutiny of the legislation, however, it is necessary to make a preliminary search to discover whether or not this right is even arguably impinged upon. A cursory inquiry reveals the following: (1) The 85-15 rule has only the most attenuated connection with interstate travel; the most we could say is that a veteran residing in a state where the schools had a relatively low veteran population would be risking possible denial of benefits if he (she) contemplated moving to a state where schools had a relatively high veteran population. (2) The nexus between the two-year rule and interstate travel is a little more obvious; yet, the chain of reasoning between the rule and any possible impingement is again very attenuated. One would have to assume the existence of 618 veterans in one particular state who seek to move to a second state wherein there existed no (or few) courses two years old or more that would meet the needs of the veterans in question. We have nothing to verify that kind of assumption. A veteran could certainly protest that he wants to travel to some point in a foreign state and that, in the absence of an acceptable course at that situs, he would be deterred from moving. The right to travel, however, deals only with the right to travel across interstate lines, and does not include any inherent right to equal social and economic advantages at all points within the foreign state into which one hopes to travel. Plaintiffs have also raised the right to associate freely and the right of privacy as potential fundamental interests that are infringed upon by the challenged legislation. We are unable to find a nexus between these rights in their present dimensions and the challenged rules. At this juncture, therefore, we must conclude that although many ideas have been put forward, none carries enough weight to create in the mind of this Court the belief that a fundamental interest is at stake. Therefore, we must strike from consideration the strict scrutiny test as a proper standard for judging the classification herein presented to us. X. During the 1970s there has been much discussion among commentators and court watchers on the question of whether or not in equal protection cases a standard of review somewhere between "strict scrutiny" and minimal inquiry in search of a "rational relationship" either has been constructed or is now emerging. One view is that a "middle tier," a medium level of review has come into being. Reed v. Reed, supra, and its progeny down to Craig v. Boren, supra, are accordingly viewed as examples of a "middle tier" approach. Justice Powell, concurring in Craig v. Boren, acknowledged this commonly articulated view of the Court's work and commented upon it as follows: As has been true of Reed and its progeny, our decision today will be viewed by some as a "middle-tier" approach. While I would not endorse that characterization and would not welcome a further subdividing of equal protection analysis, candor compels the recognition that the relatively deferential "rational basis" standard of review normally applied takes on a sharper focus when we address a gender-based classification. So much is clear from our recent cases. Craig v. Boren, Justice Powell concurring, 429 U.S. at 211, 97 S.Ct. at 464, see note. The Supreme Court has, particularly in cases involving gender-based classifications, used an "elevated standard of scrutiny"[2] when the facts of a case are such as to render the deferential rational relationship test inappropriate. At this time it does not appear that there exists a verbal formula generally agreed upon that fairly conveys the meaning of this elevated standard of review. In Craig v. Boren, the Court required that a law creating a class based on gender be "substantially related" to an "important governmental objective." In Reed v. Reed, the Court required a "fair and substantial relation" between the legislation and the objective of the legislation. Reed citing Royster Guano Co. v. Virginia, 253 U.S. 412 at 415, 40 S.Ct. 560 at 861, 64 L.Ed. 989 (1920). The applicable standard must be gleaned from each case by looking at the concrete facts giving rise to the decision. We think the following can be stated with reference to the state of the law in equal protection cases: (1) the two-tiered analysis of equal protection cases is an inadequate framework for analyzing recent work of the Supreme Court; (2) the frame-work is inadequate because some situations have been given less than strict scrutiny 619 but more than minimal scrutiny; and (3) the standard of review for cases that do not fit the old mold is a pliable standard that is not easily captured but tends to be shaped by both the character of the class involved, and the seriousness of the interest allegedly impinged upon. This pliable standard of review is evident in Trimble v. Gordon, ___ U.S. ___, 97 S.Ct. 1459, 52 L.Ed.2d 31 (1977), where Mr. Justice Powell, writing for the majority in an opinion that struck down a classification based upon illegitimacy, stated: "[T]his Court requires at a minimum, that a statutory classification bear some rational relationship to a legitimate state purpose." . . . In this context, the standard just stated is a minimum; the Court sometimes requires more. "Though the latitude given state economic and social legislation is necessarily broad, when state statutory classification approach sensitive and fundamental personal rights, this Court exercises a stricter scrutiny . . ." quoting Weber v. Aetna Casualty & Surety Co., 406 U.S. 164 at 172, 92 S.Ct. 1400 at 1405, 31 L.Ed.2d 768 (1972). The case now before the Court is one where the interest at stake "approaches fundamental and personal rights." V. A. educational benefits can make the difference between a higher education that imparts marketable skills and no training for any sort of permanent occupation. In today's specialized society, higher education or training may not be "fundamental" within the narrow legal meaning of that term, but it is certainly essential to employment which will adequately support an individual and his or her family. The scrutiny required when such interests are at stake may not be the strictest but it is much more than the minimum. In Craig v. Boren the class involved (sex) was not suspect, but it came close to being suspect. The interest involved was not fundamental, but rather far from fundamental, i. e., the interest in legally buying 3.2 beer between the ages of 18 and 21. Here we have the converse. The class is not suspect, but rather far from suspect. The interest is close to fundamental. In this situation it would appear that the standard of review should be comparable to that applied in Craig v. Boren. The government's objective is to reduce fraudulent and wasteful expenditures of money on bogus courses that lead nowhere a praiseworthy objective. This remedial objective must, of course, be viewed in the context of the larger objective of veterans' programs; namely, to aid veterans in improving their capacities and opportunities by education. It is necessary to determine whether the challenged legislation bears a substantial relation to both the remedial goal and the more primary goal itself. The challenged legislation could indeed eliminate bogus courses, but in the process, courses, and perhaps institutions, which especially serve veterans will be eliminated also. The challenged statutes are an example of legislative overkill. Fraud and waste are eliminated at the cost of eliminating quality educational opportunities for veterans. A statute that thus overreaches bears something less than a substantial relationship to important governmental objectives; hence, we must hold that the 85-15 rule and two-year rule are unconstitutional. We are cognizant of the fact that social legislation in the past has not been subjected to as critical a level of scrutiny as that which we have herein applied. See Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970). If the level of judicial scrutiny applied in cases such as Dandridge v. Williams is the law for this case, then the decision should be different. We think the standard has changed since the time cases such as Dandridge were decided. Our rationale for concluding that this change has occurred is derived from our analysis of Reed v. Reed and its progeny. In cases where the class distinctions are not based upon suspect criteria, but are close to being suspect, an intense review is required. We accept the proposition urged by plaintiffs that there has likewise been an elevation of the standard by which classifications *620 are judged when interests impinged upon come close to interests categorized as fundamental. One additional factor that has influenced this Court's decision should be noted; namely, the double-edged manner in which the new 85-15 rule is used. A veteran's enrollment cannot be approved for a course where more than 85 per cent of the students are subsidized in whole or in part by the educational institution, V. A. benefits, or grants from any federal agency. The recipients of all benefits for education from the federal government are thrown together with veterans for purposes of calculating the 85 per cent. But, when time comes for disapproving courses for veterans, then the drawing of class lines suddenly changes; then veterans stand alone to be cut off from benefits. This double-edged manner in which 85-15 is used is obnoxious; it is repugnant to the principle of equal protection. The 85-15 rule looks innocuous at first glance. The more one ponders 85-15, however, the more troublesome it becomes. What the government gives on the one hand to needy students can arbitrarily cut off veterans who might be equally needy. If aid from federal agencies and educational institutions were to be directed heavily toward one poverty-stricken area to boost the fortunes of young persons hoping to get a higher education, veterans planning on an education could be frozen out indefinitely. The 85-15 rule has a built-in capacity to sting veterans the worst when others are helped the most. The foregoing contains this Court's findings of fact and conclusions of law and shall constitute the same. NOTES [1] Plaintiffs' eighth claim for relief in their Amended Complaint appears to rest on the same legal theory as their second claim for relief, that is, the theory that equal protection principles are violated. [2] The phrase is from Craig v. Boren, supra, Mr. Justice Rehnquist dissenting, 429 U.S. at 216-218, at 97 S.Ct. at 467.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1978149/	705 F.Supp. 1224 (1988) UNITED STATES of America, Plaintiff, v. James E. GRAY and Charles J. McNally, Defendants. Crim. No. 83-10. United States District Court, E.D. Kentucky, Lexington. October 19, 1988. 1225 H. Marshall Jarrett, Public Integrity Section, Crim. Div., U.S. Dept. of Justice, Washington, D.C., Jane Graham, Asst. U.S. Atty., U.S. Dept. of Justice, Lexington, Ky., for U.S. Frank E. Haddad, Jr., Louisville, Ky., for McNally. William E. Johnson, Frankfort, Ky., James A. Shuffett, Lexington, Ky., for Gray. MEMORANDUM OPINION WILHOIT, District Judge. These criminal proceedings are before the court upon a remand from the United States Supreme Court and the Sixth Circuit Court of Appeals, 841 F.2d 1127, and defendants' motions to dismiss the indictment in accordance with the appellate mandates. The government is seeking a retrial. PROCEDURAL HISTORY On July 30, 1983, an indictment was returned against the defendants charging one count of conspiracy to violate the federal mail fraud statute with seven substantive violations. 18 U.S.C. § 1341. Six of the seven substantive mail fraud counts were dismissed by the trial court on December 16, 1983 because of the government's failure to allege that tax returns mailed by the defendants were false or fraudulent.[1] The trial of this action began on January 23, 1984 and lasted for 25 working days spanning 7 weeks. On March 6, 1984, the jury found the defendants guilty on both remaining counts. The convictions were affirmed by the Sixth Circuit Court of Appeals on May 12, 1986. United States v. Gray, 790 F.2d 1290 (6th Cir.1986). The defendants appealed to the Supreme Court and the judgment of the Court of Appeals was "reversed and the case remanded for proceedings consistent with this opinion." McNally v. United States, 483 U.S. 350, ___, 107 S.Ct. 2875, 2882, 97 L.Ed.2d 292, 303 (1987). The Sixth Circuit, by mandate dated April 4, 1988, "remanded [this action] to the district court for further proceedings consistent with the Supreme Court's disposition." (Record, docket entry no. 191). In a hearing held on April 29, 1988, the government made an oral motion for retrial on the entire indictment. This court set up a briefing schedule and the parties filed briefs in support of their respective positions. As part of their response to the motion, the defendants have also filed separate motions to dismiss. Of particular importance to the resolution of this matter are the theories upon which the government based the indictment, the government's closing argument, the resulting jury instructions, and the manner in which these theories were disposed of on appeal. In their motion to dismiss, the defendants assert various grounds for dismissal including sufficiency of the evidence and double jeopardy. FACTS The underlying facts in this action have been adequately set forth within the Sixth Circuit and Supreme Court opinions; however, for the sake of clarity here, some but not all will be revisited. The defendants, along with a third individual, Howard P. "Sonny" Hunt, allegedly utilized a company called Seton Investments, Inc. ("Seton") to funnel certain insurance commissions for workers compensation insurance to the personal use of Hunt and the defendant Gray from 1975 to 1981. Although the defendant McNally was listed as an officer, director, and sole stockholder of Seton, the government presented evidence which indicated that McNally was only acting as Seton's front-man for the real owners, Hunt and Gray. During the operation of this scheme, Hunt was the Kentucky Democratic Party Chairman and Gray was a public official of the Commonwealth of Kentucky. 1226 THEORIES OF THE CASE To support the conspiracy count to commit mail fraud, the government relied upon four theories. The first two theories dealt with a conspiracy to defraud the Commonwealth of Kentucky of its right to have its affairs conducted honestly and impartially and of its right to be made aware of all pertinent facts in the expending of funds to pay for insurance. (Indictment, p. 4). At the time the indictment was drafted, both theories were supported by a long line of Court of Appeals decisions holding that defrauding citizens of their intangible rights to honest and impartial government can be a violation of the mail fraud statute. McNally, 483 U.S. at ___, 107 S.Ct. at 2879, 97 L.Ed.2d at 299. The third theory involved a more traditional violation of mail fraud by asserting a conspiracy to obtain money and other things of value by false representations. Id. at 5. Finally, the indictment also charged a conspiracy to commit mail fraud by defrauding the Internal Revenue Service. This last thrust is sometimes referred to as the Klein theory of mail fraud. The Klein theory was also used as a basis for six of the seven substantive mail fraud counts. United States v. Klein, 247 F.2d 908 (2d Cir.1957), cert denied, 355 U.S. 924, 78 S.Ct. 365, 2 L.Ed. 2d 354 (1958). Further, the remaining substantive mail fraud count was supported by the first three theories utilized in the conspiracy count. Another distinction in the substantive counts was the type of mailing addressed in each particular count. The six Klein theory counts involved the mailing of a state or federal tax return while the remaining substantive count involved the mailing of a $50,000 check for payment of certain insurance commissions. As mentioned above, the six Klein counts were dismissed for failure to allege that the particular tax returns were false. Consequently, only the conspiracy count and the remaining substantive count remained for consideration by the jury. Believing that the second mail fraud theory was subsumed in the first theory, the trial court's instructions to the jury quoted the language of the indictment on three theories: the intangible rights theory of mail fraud, the traditional theory, and the Klein theory for each of the two remaining counts. However, the Klein theory was not a part of the substantive mail fraud count and the government conceded that it was error to include this theory in the substantive count.[2]McNally, 483 U.S. at ___, n. 4, 107 S.Ct. at 2878 n. 4, 97 L.Ed.2d at 299 n. 4. In their motions to dismiss, the defendants state that the trial court did not instruct upon the traditional theory and that the government has conceded that the trial court acquitted the defendants upon the Klein theory. Although the defendants are technically incorrect in their assertions and the trial court did quote the language of the indictment setting forth these two theories, this Court believes that the only real theory asserted was the intangible rights theory. The instructions do not contain the development of the traditional and Klein theories as set forth in the government briefs written in support of the motion for retrial. In support of the traditional theory of mail fraud, the government now asserts at 1227 least two additional theories that were not developed in the jury instructions. First, the government asserts that because of false representations made to Wombell Insurance Agency, the defendants obtained money that would not have been paid had the sham status of Seton been revealed. At the time the commissions were paid, a Kentucky statute prohibited the payment of commissions to any person not licensed as an agent or solicitor. KRS 304.9-420 (repealed 1984). Second, the government now states that the defendants violated their fiduciary duty to the Commonwealth by concealing the true ownership of Seton by Hunt and Gray. Cf. United States v. Runnels, 833 F.2d 1183 (6th Cir.1987), vacated to rehear en banc, 842 F.2d 909 (6th Cir.1987). As support for the position that these theories and the Klein theory were included in the instructions, the government refers to selected portions of the charge. In addition to the quotation from the indictment, the government relies upon a portion of the conspiracy instruction describing the charge of a "secret agreement" between Gray and McNally and the setting up of the Seton Corporation "for the purpose of concealing and disguising" the receipt of commissions. (Record, Docket Entry no. 187, Transcript of Instructions & Verdict, p. 27-18). The Court notes that this passage makes no reference to concealment from Wombell or violation of fiduciary duty. Moreover, this passage supports the intangible rights theory of a right to have the Commonwealth's affairs conducted free from "dishonesty, deceit, ... and fraud." (Indictment, p. 4). The government also cites the inclusion of Instruction 14 which deals with a defense to the Klein theory of mail fraud. (Instructions, p. 27-23). This instruction was submitted by the defendants and states the defense of good faith reliance upon the advice of accountants in preparation of tax returns. However, this instruction does not explain the Klein theory to the jury or make any reference to a determination that the returns filed were false or fraudulent. Finally, the government relies upon the inclusion of the trial court's instruction that the jury must reach a unanimous verdict on at least one of the two objects set out in the indictment. This means that you must all agree unanimously on which object or objects charged was an agreed purpose of the conspiracy.... ... If you find that the conspiracy sought to achieve either of the two objects set out in the Indictment, in order to convict on that count you also must find that one of the conspirators committed at least one of the overt acts charged in the Indictment that was in furtherance of that object of the conspiracy to which you find the conspirators agreed. (Instructions, p. 27-19). Instead of supporting the government's position, this instruction only points out the problems caused by the inclusion of three mail fraud theories in a single count of the indictment. Although the government asserts that at least three theories of mail fraud were set forth in the indictment, this instruction only refers to "two objects" set out in the indictment. Confusion has been caused by the labeling of the theories set out in the indictment as (a)(1)(2)(3) and (b). (Indictment, p. 3-5). At best, this instruction indicates that the traditional theory of mail fraud had no distinction apart from the intangible rights theory listed as (a)(1) & (2) in the indictment. Further, this instruction did not require the jury to find that the defendants committed overt acts in furtherance of both of the objects. If the government had requested a proposed instruction requiring the jury to find that the defendants furthered both objects, then there would be no question that the jury would have considered the Klein theory. CLOSING ARGUMENT An examination of the government's closing argument also provides support for the defendants' claim that the traditional and Klein theories of mail fraud were not effectively presented to the jury. The Court observes that the government's closing lasted for over an hour and covered over eighty pages of the trial transcript. 1228 At several points in his closing argument, the government's counsel stresses that the theory of the government is the intangible rights theory, the right to honest and impartial government. ... Now, in this kind of mail fraud case where the rights of the citizens to honest government has been deprived, the United States does not have to prove an actual dollar loss, a financial loss to the state. What the United States must prove is that the State of Kentucky was deprived of its right to have its public officials carry out their official duties honestly and impartially. (Transcript of Closing Argument, Record, Docket Entry No. 186, p. 26-10).[3] While the intangible rights theory is extensively argued, little reference is made to the other theories. The only direct reference to the traditional theory found by this court is a single sentence which states that "the Judge will instruct you that the mail fraud statute can be violated when people develop a scheme to deprive money or other tangible property in this case money when they devise a scheme to obtain money." Id. at 26-19. The Court cannot find any reference to false representations made to Wombell or any explanation as to whose property was fraudulently obtained. Under the Supreme Court's interpretation of the mail fraud statute, even a traditional claim of mail fraud must be supported by proof of a loss of tangible property. McNally v. United States, 483 U.S. 350, ___, 107 S.Ct. 2875, 2881, 97 L.Ed.2d 292, 302 (1987). Although the government's counsel referred to the Klein theory more often than the traditional theory, this Court has found only three references to the tax conspiracy. In the first reference, the government quoted the language of the indictment and went into a short explanation of the facts. (Transcript of Closing Argument, Record, Docket Entry No. 186, p. 26-24). The government explained that Seton was in a lower tax bracket than the defendant Hunt and that the creation of Seton was advantageous for Hunt. However, no direct reference was made to the fact that Seton's return was false at this point. In the second reference, the government does refer to an improper deduction for a $38,000 payment to Hunt's son and how the IRS was impeded and impaired by being unable to determine who specifically earned the commissions paid to Seton. Id. at 26-62 thru 26-63. In the final reference to the Klein theory, the government attempted to rebut the defense of good faith reliance upon the advice of accountants. (Transcript of Government's Rebuttal, Record, Docket Entry No. 128, pp. 4-5). While these last two references may have implied that the jury must find that the tax returns were false or fraudulent, the government did not state this as a direct requirement and the instructions contained no reference in this regard. In any event, this court finds a statement made by the government's counsel in one of his final sentences to the jury most illuminating. Often, counsel restate their most important argument or the central issue of a case during the last few seconds of the closing argument. In these closing seconds, government's counsel stated that [n]ow ladies and gentlemen of the jury, the right that has been violated here the gravamen, the center of the government's case, is that public officials are entitled ... the public is entitled, I should say, to have its public officials make their decisions honestly and fairly ... and to make the decisions that affected the state honestly and fairly and impartially. Id. at 12 (emphasis added). By the closing argument presented to the jury and the trial court's instructions, we must conclude that the government did not truly pursue the traditional and Klein theories of mail fraud. APPEAL HISTORY After the trial court dismissed six of the seven substantive counts, the government filed a notice of appeal and moved to stay the trial on the remaining counts. The motion to stay was overruled on January 1229 12, 1984. After the guilty verdicts were returned on March 6, 1984, the defendants filed a separate appeal with the Sixth Circuit Court of Appeals. The Sixth Circuit rendered a per curiam decision on May 12, 1986 with a separate concurrence and dissent by Senior Judge Neese. United States v. Gray, 790 F.2d 1290 (6th Cir. 1986). Although the Sixth Circuit set out a complete statement of the mail fraud theories listed in Count I of the indictment, the court did not mention the government's traditional and Klein theories of mail fraud. Id. at 1293-94. In fact, the court made no effort to distinguish any theory other than the intangible rights theory. "As outlined in Count one of the indictment, Gray and McNally were charged with conspiring to commit acts of mail fraud the object of which was to deny the citizens of Kentucky certain `intangible rights,'...." Id. at 1294. The court extensively discussed the intangible rights theory and held that the theory was adequately supported by a long line of Court of Appeals decisions. Id. While the defendants also requested that the court address the sufficiency of the evidence on the Klein theory of mail fraud, the court refused to address this issue since it found that the intangible rights theory had been demonstrated beyond a reasonable doubt. Id. at 1296 n. 2. The Sixth Circuit also addressed the government's appeal of the dismissal of the six substantive Klein theory counts. In each of the six counts, the government attempted to assert criminal liability for the mailing of different tax returns. However, tax returns are required by law to be mailed and do not in themselves set forth a scheme to defraud under the mail fraud statute. Id. at 1298. Because the indictment failed to charge that the returns were false or fraudulent, the indictment failed to set forth one of the essential elements of mail fraud and the dismissal was affirmed. Id. Although the conspiracy count did allege that the returns were false, the government failed to expressly incorporate this portion of the conspiracy count in the substantive counts.[4] Next, the defendants appealed the decision of the Sixth Circuit to the Supreme Court. The government did not appeal the dismissal of the six substantive counts. McNally v. United States, 483 U.S. 350, ___ n. 2, 107 S.Ct. 2875, 2878 n. 2, 97 L.Ed.2d 292, 298 n. 2 (1987). In a majority opinion written by Justice White,[5] the Supreme Court closely examined the government's theories of mail fraud and the expression of these theories in the jury instructions. Id., 483 U.S. at ___-___, 107 S.Ct. at 2878-79, 97 L.Ed.2d at 298-99. After an extensive discussion of the intangible rights theory of mail fraud and the legislative history of the mail fraud statute, the Court concluded that "[r]ather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read § 1341 as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has." Id., 483 U.S. at ___, 107 S.Ct. at 2881, 97 L.Ed.2d at 302. Further, the Supreme Court addressed the manner in which the mail fraud counts were presented to the jury. We note that as the action comes to us, there was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property. It was not charged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance. Hunt and Gray received part of the commissions but those commissions were not 1230 the Commonwealth's money. Nor was the jury charged that to convict it must find that the Commonwealth was deprived of control over how its money was spent. Indeed, the premium for insurance would have been paid to some agency, and what Hunt and Gray did was to assert control that the Commonwealth might not otherwise have made over the commissions paid by the insurance company to its agent. Id., 483 U.S. at ___-___, 107 S.Ct. at 2882, 97 L.Ed.2d at 302-03. In a footnote, the Court also noted that the jury was not charged "that requiring the Wombell agency to share commissions violated state law." Id., 483 U.S. at ___ n. 9, 107 S.Ct. at 2882 n. 9, 97 L.Ed.2d at 303 n. 9. This fact weighs against the government's assertion that the traditional theory was included in the jury instructions. Finally, the Supreme Court addressed the government's alternative argument that the convictions should be affirmed because of the jury's finding of mail fraud on the traditional theory. Although the Government now relies in part on the assertion that the petitioners obtained property by means of false representations to Wombell, Brief for United States 20-21, n. 17, there was nothing in the jury charge that required such a finding. We hold, therefore, that the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of § 1341. The government concedes that if petitioners' substantive mail fraud convictions are reversed their conspiracy convictions should also be reversed. Id., at 36, n. 28. The judgment of the Court of Appeals is reversed and the case remanded for proceedings consistent with this opinion. Id., 483 U.S. at ___, 107 S.Ct. at 2882, 97 L.Ed.2d at 303 (emphasis added). In its brief to the Supreme Court, the government devoted a significant amount of time to the argument that the jury found the defendants guilty of the traditional theory of mail fraud and that the intangible rights theory need not be reached. (Brief of United States, pp. 17-22). The government also argued that this action should be remanded to the Court of Appeals for a determination of the sufficiency of the evidence on the Klein theory under the conspiracy count. Id. at 36. However, the government conceded that the conspiracy count should be reversed if the substantive mail fraud conviction should be reversed. "Gray notes ... that, if the Court reverses petitioners' convictions on the mail fraud count, it follows that the Court should reverse the conspiracy convictions as well. This is correct. Since the jury almost certainly concluded that petitioners conspired to violate the mail fraud statute, petitioners' conspiracy convictions cannot stand if the allegation that their acts violated the mail fraud statute is legally defective. Stromberg v. California, 283 U.S. 359, 367-368 [51 S.Ct. 532, 535, 75 L.Ed. 1117] (1931)." Id. at 36 n. 28. (emphasis added). It is the opinion of this court that this emphasized phrase is a concession by the government that the Klein theory under the conspiracy count and the traditional theory under the substantive count were not truly considered by the jury and that the intangible rights theory was the primary theory considered by the jury. The government was inconsistent in arguing that the conviction on the substantive count should be upheld on the traditional theory while conceding that the conspiracy count would fail even if the intangible rights theory of mail fraud should be rejected. Although the government's position is supported by the Stromberg case when a Court is unable to determine the particular object of a conspiracy because of a general verdict, Stromberg, 283 U.S. at 367, 51 S.Ct. at 535, this statement is added support for the determination that the intangible rights theory was the primary and only real theory presented to the jury. DISCUSSION The defendants have stated at least two grounds in support of their motions to dismiss: insufficient evidence on the remaining 1231 theories and double jeopardy. This court is hesitant to rule upon the sufficiency of evidence claim because of the refusal of both the Court of Appeals and the Supreme Court to address this issue. In essence, the defendants are asking this court to give appellate review to the decision of the trial court finding that the evidence was sufficient on these issues. Because of the lack of any specific direction from the Supreme Court or the Court of Appeals on the issue of retrial, this court shall reserve the sufficiency of the evidence question for resolution by an appellate court should this Court's order be appealed. In any event, this court will address the double jeopardy issue which is appropriately before us and is dispositive of the motions to dismiss and the motion for retrial. The most convincing double jeopardy argument of the defendants involves the recent Sixth Circuit decision of Saylor v. Cornelius, 845 F.2d 1401 (6th Cir.1988). In Saylor, the defendant was indicted on three theories of murder in separate counts, i.e., liability as a principal, an accomplice, and as a conspirator. At trial, considerable evidence was introduced on the accomplice theory but there was a lack of evidence on the principal and conspirator theories. The trial judge instructed the jury on only the murder and conspiracy theories and no instruction was given on the accomplice theory. The prosecution did not object to the instructions. Id. at 1402. On appeal, the state appellate court reversed the conviction and remanded the case for retrial on the accomplice theory because the instructional error only was involved. Id. at 1402. However, upon appeal of a later habeas petition, the Sixth Circuit held that the retrial was barred by the double jeopardy clause of the fifth amendment. Id. at 1408-09. The opinion contains an extensive examination of the principles and purposes underlying the double jeopardy clause. Once jeopardy has attached a defendant may not be retried upon the occurrence of a mistrial not based on "manifest necessity", an acquittal of the charge, or upon a reversal based upon insufficient evidence. Id. at 1405. However, in most cases where the defendant is found guilty and the conviction is reversed for an instructional error, the defendant may be retried because in such situations the guilty verdict indicates that there was sufficient evidence to convict on the offense charged. Id. at 1404. The failure of the jury to convict Saylor of accomplice liability was not the result of a factual error in the instructions, but in the failure of the prosecution to request an instruction on the accomplice theory. Further, the court explained that: [a]lthough there is no evidence that the prosecutor acted deliberately, permitting a retrial in this case or in any similar case would be fraught with the possibility of manipulation. A prosecutor could indict on several counts or theories, present evidence on each one of them, and then go to the jury only on selected ones, in effect holding the others in reserve for a subsequent or improved effort. Id. at 1408 (emphasis added). The court analogized the situation in Saylor to a case reversed for prosecutorial misconduct which effectively terminates any retrial because the jury could have reached a decision had it not been for the misconduct. Consequently, the court found that the Double Jeopardy Clause forbids a second trial ... because such a trial would be vexatious, regardless of the jury's deliberation on the theory charged to it. It would be vexatious because the defendant underwent the jeopardy of a full trial, ... and the trial failed to terminate in a verdict for reasons that cannot fairly be charged to the defendant. Id. Similarly, we are convinced that the government submitted only the intangible rights theory to the jury in the present action and that the liability of the defendants on the traditional and Klein theories terminated when the government failed to effectively pursue these theories with the jury. The government could have pursued these theories in separate counts in drafting the indictment or requested that special interrogatories be submitted to the 1232 jury on each theory. However, the government did not pursue these methods and included all theories in each count. The defendants in this action underwent a five-week trial and were forced to present evidence rebutting each theory. During closing arguments, the government revealed that the "center" of its case was the intangible rights theory and this theory was extensively examined in the instructions. The other theories were given little attention in the government's argument and the instructions. The government offers at least three arguments in opposition to the application of the Saylor case. First, the government contends that the defendants have waived this argument because it was not brought up on appeal. This argument is not convincing because the intangible rights theory was presented to the jury and was still viable until it was rejected by the Supreme Court. Accordingly, the defendants had no double jeopardy defense until the decision of the Supreme Court was announced and no waiver could have occurred sooner. Second, the government asserts that the Saylor case only applies to theories set forth in separate counts, but we see no reason to limit Saylor to such situations. In fact, the court specifically referred to "several counts or theories" and the reasoning behind the decision is applicable to this action. Id. at 1408. Third, the government attempts to distinguish the facts in the present action by stating that the traditional and Klein theories were presented to the jury. For the reasons set forth above, this Court believes that these theories were not truly presented to the jury in the government's closing argument or in the instructions. On the other hand, if this action had resulted in a shorter trial and the government's closing had not been as extensive, this Court would not be willing to state that the government failed to submit the alternative theories to the jury. The special facts of this case mitigate in favor of a determination that these theories were not truly submitted even though the instructions technically mentioned the theories by quoting the portions of the indictment that contained these theories. A thirty-nine page indictment was returned against the defendants. Over sixty witnesses were called by the prosecution, and the trial lasted for over five weeks. If the government had really been serious as to establishing liability on each mail fraud theory, they could have chosen to do so. Instead, the government abandoned the other theories and focused the attention of the jury, the trial court, and the appellate courts upon the intangible rights theory. The cases that apply the double jeopardy clause limit both sides to one fair trial. Cf. id. at 1407. If a defect in a trial is caused by a procedural error or other error that cannot be fairly imputed to the prosecution, then the case can be retried because the government did not have a fair trial. On the other hand, if the error is caused by prosecutorial misconduct or the prosecution's failure to present a particular theory to the jury, the government should not be given a second bite at the apple. The decision to grant the defendants' motions to dismiss on grounds of double jeopardy and to deny the government's motion for retrial are also supported by the Supreme Court's order of reversal and the Sixth Circuit's mandate to this Court. The Supreme Court stated that the "prosecution's principal theory of the case" was the intangible rights theory and totally rejected this theory and reversed the convictions without any directions as to a possible retrial. Although the government specifically requested that the issue of the sufficiency of the evidence on the Klein theory be remanded to the Court of Appeals, no such directions were given. The fact is that this action was "remanded for proceedings consistent with this opinion." Id. 483 U.S. at ___, 107 S.Ct. at 2882, 97 L.Ed.2d at 303 (emphasis added). A retrial of this action would be inconsistent with the specific directions of the Supreme Court because of the repudiation of the only theory truly presented to the jury. Apparently, the Sixth Circuit did not interpret the Supreme Court's directions as an order to proceed on the remaining theories *1233 in the indictment. The issue of the sufficiency of the evidence on the Klein theory could have been addressed by the Sixth Circuit if it believed that the remaining claims were still viable and the case was remanded back to this Court for "proceedings consistent with the Supreme Court's disposition." (Record, Docket Entry No. 191). It should be remembered that the government argued that even if the "good government" concept should be rejected, the conviction would stand on the remaining theories. This argument did not prevail. We believe that had the Supreme Court had a retrial in mind, or the Court of Appeals for that matter, they would have specifically directed another trial. In conclusion, although the traditional and Klein theories were technically presented to the jury by the trial court's quotation of a portion of the indictment, these theories were in reality not presented to the jury and a retrial would place the defendants again in jeopardy and this is expressly prohibited by the Constitution. NOTES [1] This decision was affirmed by the Sixth Circuit Court of Appeals and was not pursued by the government in its appeal to the Supreme Court. United States v. Gray, 790 F.2d 1290 (6th Cir.1986). [2] Indictment charges in part that the defendants devised a scheme artifice to: (a)(1) defraud the citizens of the Commonwealth of Kentucky and its governmental departments, agencies, officials, and employees of their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud; and, (2) obtain, (directly or indirectly) money and other things of value, by means of false and fraudulent pretenses, representations, and promises, and the concealment of facts. . . . . . (b) Defraud the United States by impeding, impairing, and obstructing and defeating the lawful governmental functions of the Internal Revenue Service of the Treasury Department of the United States of America in the ascertainment, computation assessment, and collection of federal taxes. (Record, Docket Entry no. 187, Transcript of Instructions & Verdict, pp. 27-16 thru 27-17 & 27-24 thru 27-25). [3] See also id. at pp. 26-10 thru 26-11, 26-14, 26-16 & 26-18. [4] In a separate dissenting opinion, Senior Judge Neese disagreed with the dismissal of the six substantive counts and stated that the falsity of the tax returns should be a matter of proof and not of pleading. Gray, 790 F.2d at 1299 (Neese, Senior J., dissenting). [5] Justice White was joined in his opinion by Chief Justice Rehnquist and Justices Brennan, Marshall, Blackmun, Powell, and Scalia. Justice Stevens wrote a dissenting opinion joined in part by Justice O'Connor.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/4555585/	In the United States Court of Federal Claims OFFICE OF SPECIAL MASTERS No. 17-929V (not to be published) ************************* * * ELIZABETH EVANS, * * * Filed: June 24, 2020 Petitioner, * * v. * * Decision by Stipulation; Damages; * Influenza (“Flu”) Vaccine; Shoulder SECRETARY OF HEALTH AND * Injury Related to Vaccine Administration HUMAN SERVICES, * (SIRVA). * * Respondent. * * ************************* * Shealene Mancuso, Muller Brazil, LLP, Dresher, PA, for Petitioner. Robert Coleman III, U.S. Department of Justice, Washington, DC, for Respondent. DECISION ON JOINT STIPULATION 1 On July 1, 2017, Elizabeth Evans (“Petitioner”) filed a petition, seeking compensation under the National Vaccine Injury Compensation Program (“the Vaccine Program”).2 Pet., ECF No. 1. Petitioner alleges she suffered a shoulder injury related to vaccine administration (SIRVA) as a result if receiving an influenza vaccine on October 9, 2015. See Stipulation ¶ 2, 4, dated June 24, 2020 (ECF No. 454); see also Petition. Respondent denies “that [P]etitioner sustained a Table SIRVA injury, and denies that the 1 Although this Decision has been formally designated “not to be published,” it will nevertheless be posted on the Court of Federal Claims’ website in accordance with the E-Government Act of 2002, 44 U.S.C. § 3501 (2012). This means the ruling will be available to anyone with access to the internet. As provided by 42 U.S.C. § 300aa-12(d)(4)(B), however, the parties may object to the Decision’s inclusion of certain kinds of confidential information. Specifically, under Vaccine Rule 18(b), each party has fourteen days within which to request redaction “of any information furnished by that party: (1) that is a trade secret or commercial or financial in substance and is privileged or confidential; or (2) that includes medical files or similar files, the disclosure of which would constitute a clearly unwarranted invasion of privacy.” Vaccine Rule 18(b). Otherwise, the Decision in its present form will be available. Id. 2 The Vaccine Program comprises Part 2 of the National Childhood Vaccine Injury Act of 1986, Pub. L. No. 99-660, 100 Stat. 3755 (codified as amended at 42 U.S.C. §§ 300aa-10–34 (2012)) (hereinafter “Vaccine Act” or “the Act”). All subsequent references to sections of the Vaccine Act shall be to the pertinent subparagraph of 42 U.S.C. § 300aa. influenza vaccine caused [P]etitioner to suffer from a shoulder injury or any other injury.” See Stipulation ¶ 6. Nonetheless, both parties, while maintaining their above-stated positions, agreed in a stipulation filed June 24, 2020 that the issues before them can be settled and that a decision should be entered awarding Petitioner compensation. I have reviewed the file, and based upon that review, I conclude that the parties’ stipulation is reasonable. I therefore adopt it as my decision in awarding damages on the terms set forth therein. The stipulation awards: a lump sum of $38,500.00 in the form of a check payable to [P]etitioner. Stipulation ¶ 8. This award represents compensation for all damages that would be available under 42 U.S.C. § 300aa-15(a). I approve a Vaccine Program award in the requested amount set forth above to be made to Petitioner. In the absence of a motion for review filed pursuant to RCFC Appendix B, the Clerk of the Court is directed to enter judgment herewith.3 IT IS SO ORDERED. s/ Katherine E. Oler Katherine E. Oler Special Master 3 Pursuant to Vaccine Rule 11(a), the parties may expedite entry of judgment by jointly filing notice renouncing their right to seek review.	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/2986280/	August 6, 2013 JUDGMENT The Fourteenth Court of Appeals EX PARTE RONALD DARNELL CEPHUS NO. 14-12-00901-CV ________________________________ This cause was heard on the transcript of the record of the court below. Having considered the record, this Court holds that there was no error in the judgment. The court orders the judgment AFFIRMED. We further order that all costs incurred by reason of this appeal be paid by appellant, Ronald Darnell Cephus. We further order this decision certified below for observance.	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/2986285/	August 6, 2013 JUDGMENT The Fourteenth Court of Appeals ANTONIO CUEVAS, Appellant NO. 14-12-00480-CR V. THE STATE OF TEXAS, Appellee ________________________________ This cause was heard on the transcript of the record of the court below. Having considered the record, this Court holds that there was no error in the judgment. The Court orders the judgment AFFIRMED, and that this decision be certified below for observance.	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/2580445/	122 F.Supp.2d 329 (2000) Madeline FINN-VERBURG, Plaintiff, v. NEW YORK STATE DEPARTMENT OF LABOR, Defendant. No. 98-CV-912. United States District Court, N.D. New York. November 8, 2000. 330 Peter Henner, Clarksville, NY, for plaintiff. Hon. Eliot L. Spitzer, Attorney General of the State of New York, Department of Law, The Capitol, Albany, NY (Richard J. Freshour, Asst. Attorney General, of Counsel) for defendant. MEMORANDUM-DECISION and ORDER HURD, District Judge. I. INTRODUCTION Plaintiff Madeline Finn-Verburg ("Finn-Verburg") brings this action alleging that the defendant New York State Department of Labor ("DOL") discriminated against her in her employment based upon her gender. Her claims are brought pursuant to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, 42 U.S.C. § 1983, the New York Civil Service Law, the New York Human Rights Law, and state common law. Defendant moves for summary judgment pursuant to Federal Rules of Civil Procedure 56. Plaintiff opposes defendant's motion. Oral argument was heard on August 25, 2000, in Albany, New York. Decision was reserved. II. FACTS The following facts are taken in the light most favorable to Finn-Verburg, as must be done on a motion for summary judgment. Finn-Verburg has been employed by DOL for eighteen years. Her supervisor during the time period relevant here was Roger Alley ("Alley"). Finn-Verburg contends that sexual harassment by Alley began in 1991. In 1992 Finn-Verburg requested and received a reduction in her work hours to three days per week. Although her stated reason for the leave was personal and family reasons, she requested the leave to limit contact with Alley. In November 1994, Finn-Verburg attended a sexual harassment training class given by DOL, which included directions for filing complaints of discrimination. In June 1997 Finn-Verburg filed a complaint alleging sexual harassment with 331 DOL's Division of Equal Opportunity Development ("DEOD"). She alleged that Alley glared at her in a hostile manner, subjected her to continual verbal abuse, made false accusations against her, attacked her character, followed her in a physically aggressive manner, used profane and obscene language on at least one occasion, stalked her outside of the work-place, and attempted to obtain personal information about her from other employees. Karen Martin ("Martin"), an Affirmative Action Administrator II in DEOD, investigated Finn-Verburg's allegations of sexual harassment. Martin determined that Alley exhibited poor supervisory skills, but that he had not created a hostile work environment. Martin recommended that a counseling memorandum be placed in Alley's personnel records, additional managerial/supervisory training be provided, and quarterly interviews of Alley's staff be conducted to assure that Alley did not retaliate against his employees for their statements against him made during the course of the investigation. There is no evidence indicating that any of these recommendations were carried out. At least four other women have complained about sexual harassment on the part of Alley. These women also made claims that Alley retaliated against them for making such complaints. Beth Schmidt ("Schmidt") made a complaint about the same type of behavior about which Finn-Verburg complains. Additionally, Schmidt alleged that Alley made inappropriate comments to her, and showed her photographs of transvestites that she did not want to see. When Schmidt complained about Alley to his supervisor, Christopher Forkeutis, he laughed. An investigation by DEOD yielded similar recommendations as did the Finn-Verburg investigation: Alley needed to attend sexual harassment training and sensitivity training. Schmidt asserts that Alley retaliated against her for making the DEOD complaint, by giving her a performance complaint. Schmidt ultimately transferred out of Alley's section. Debra Atwell ("Atwell"), a DOL employee since 1969, also complained of Alley's conduct. Atwell further alleged that Alley retaliated against her because of the part that she played in the DEOD investigation of Schmidt's complaint. Atwell transferred to the Poughkeepsie office in order to get away from Alley. Virginia Ford was employed by DOL since 1983. In 1994 Alley became Ford's direct supervisor. Ford alleged that Alley created a hostile work environment. She avers that Alley stated that women should stay at home and not work. Ford did not file a formal complaint, but did complain to her indirect supervisor, Christopher Forkeutis, about Alley. In 1995 Ford requested a transfer away from Alley. She was transferred in 1996. Lucinda Kentris ("Kentris") was Alley's secretary from December 1996 to October 1997. On June 18, 1997, she filed a complaint with the DEOD regarding the alleged hostile environment created by Alley. Kentris alleged conduct by Alley substantially the same as that alleged by Finn-Verburg. On July 10, 1997, Alley wrote a performance report dismissing Kentris. However, the personnel office rejected Alley's report and Kentris was permitted to retain her employment with a second probationary period. Martin investigated Kentris's complaint and determined that Alley's alleged conduct did not constitute discrimination. On October 29, 1997 Kentris resigned from DOL, citing Alley's conduct as the reason. III. DISCUSSION A. Summary Judgment Standard Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56; 332 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Richardson v. New York State Dep't of Correctional Servs., 180 F.3d 426, 436 (2d Cir.1999). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Richardson, 180 F.3d at 436; Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983). Once the moving party has met the initial burden of demonstrating the absence of a genuine issue of material fact, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56; Liberty Lobby, Inc., 477 U.S. at 250, 106 S.Ct. 2505; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348. At that point the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. 1348. To withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Liberty Lobby, Inc., 477 U.S. at 248-49, 106 S.Ct. 2505; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348. Defendant relies upon several bases for summary judgment, which will be addressed seriatim. B. Hostile Work Environment Under Title VII, in order to establish a prima facie case of hostile work environment discrimination, a plaintiff must sufficiently plead and prove: (1) that she is a member of a protected group; (2) that she was the subject of unwelcome advances; (3) that the harassment was based upon her sex; and (4) that the harassment affected a term, condition or privilege of her employment. See Cosgrove v. Sears, Roebuck & Co., 9 F.3d 1033, 1042 (2d Cir.1993). A hostile work environment is one which is "permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive work environment." Harris v. Forklift Sys., Inc., 510 U.S. 17, 21, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993)(internal quotations omitted) (citations omitted); Torres v. Pisano, 116 F.3d 625, 630 (2d. Cir.1997). The conduct must be severe or pervasive enough that an objective, reasonable person would find the work environment hostile or abusive. Harris, 510 U.S. at 21, 114 S.Ct. 367. Additionally, the victim must subjectively perceive the environment as abusive. Id. at 21-22, 114 S.Ct. 367. One of the critical issues in a hostile environment claim is the nature of the work environment itself. See Hicks v. Gates Rubber Co., 833 F.2d 1406, 1415 (10th Cir.1987); accord Perry v. Ethan Allen, Inc., 115 F.3d 143, 149 (2d Cir.1997). Several courts have held that evidence of discriminatory conduct directed at other employees is relevant in establishing a generally hostile environment and intent to create such an environment. See Hicks, 833 F.2d at 1415-16; Perry, 115 F.3d at 149; Leibovitz v. New York City Transit Auth., 4 F.Supp.2d 144, 151 (E.D.N.Y.1998)(citing Hicks for the proposition that evidence that other employees had been harassed should be considered in determining whether plaintiff established a claim for hostile work environment); EEOC v. A. Sam & Sons Produce Co., 872 F.Supp. 29, 36 (W.D.N.Y.1994)(holding that discriminatory conduct directed at co-workers can be used as evidence of hostile environment). Defendant first contends that plaintiff cannot show that Alley discriminated against her because of sex, because Alley treated all employees in the same manner. Defendant argues that Alley was a poor supervisor of both males and females, and that Alley had no particular anti-female bias. Defendant points to several facts 333 that it contends are undisputed in support of its position. There is no dispute that Finn-Verburg never observed Alley being violent or aggressive toward any female employee other than herself. However, Finn-Verburg has adduced competent evidence from Finn-Verburg herself and other female employees of such conduct by Alley against them. Such conduct includes yelling, slamming fists, aggressiveness, and flying into a rage. There is also no dispute that Alley did not request sexual favors from Finn-Verburg or other female employees. This is not fatal to Finn-Verburg's claim, however, as it is well established that creation of a hostile work environment provides a basis for Title VII liability in addition to quid pro quo harassment. Defendant contends that Alley never referred to Finn-Verburg in a derogatory manner; however, Finn-Verburg disputes this fact. Finn-Verburg relates one occasion when Alley subjected her to a torrent of profane and obscene language and alleges that Alley continually subjected her to anger, verbal abuse, and false accusations. Defendant contends that Alley never spoke to Finn-Verburg or other female employees in a sexually offensive manner. The parties do not dispute that Alley did not make sexually offensive gestures toward females. However, Finn-Verburg herself states that she was subjected to sexually offensive language. Additionally, Schmidt and Kentris, both female, testified by affidavit that Alley subjected them to sexually offensive language. Finn-Verburg has also adduced some evidence that men and women were treated differently. Further, there is no evidence that Alley treated men in the same manner that has been related here about his treatment of women. Defendant has failed to demonstrate that no genuine issue of fact remains for trial. Rather, a genuine issue of material fact regarding whether the hostile work environment[1] at DOL was based upon Finn-Verburg's gender. C. Faragher Defense An employer may shield itself from liability for discrimination by a supervisor when no tangible job action was taken against the employee who was the subject of the discrimination. Faragher v. City of Boca Raton, 524 U.S. 775, 807, 118 S.Ct. 2275, 2292-93, 141 L.Ed.2d 662 (1998). The employer must show that it (a) "exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise." Id., 118 S.Ct. at 2293. Proof that the employer had an anti-harassment policy and a complaint procedure may provide evidence of the employer's use of reasonable care. Id., 118 S.Ct. at 2293. Failure of the employee to use reasonable care to avoid harm ordinarily is proven by establishing that the employee unreasonably failed to use the complaint procedure. Id. at 807-08, 118 S.Ct. at 2293. The burden of proving both elements of the defense by a preponderance of the evidence is on the defendant employer. Id. at 807, 118 S.Ct. at 2293. Defendant argues that it is entitled to protection from liability because Finn-Verburg failed to avail herself of the complaint procedure available to her at an earlier time. Defendant contends that if, 334 as the plaintiff contends, Alley began sexual harassment of her in 1991, it was unreasonable for her to wait until 1997 to complain. According to defendant, Finn-Verburg's failure to complain earlier was unreasonable, and this is demonstrated by her attendance in 1994 at a sexual harassment training class put on by DOL. Moreover, defendant contends that there is no genuine issue of material fact as to its exercise of reasonable care, therefore establishing the first element of the defense. Since the defense would not come into play unless a finding of harassment was made, for the purposes of this discussion it will be assumed that Alley's conduct constituted sexual discrimination. As to the first element of the defense, while DOL had a policy and procedure for complaints in place, a question of fact remains for jury determination as to whether DOL exercised reasonable care in promptly correcting the harassment. DOL unquestionably investigated plaintiff's complaint. Martin conducted the investigation and made recommendations. However, no evidence is in the record indicating that any of the recommendations were carried out. In addition, there is evidence in the record that prior and concurrent complaints of sexual harassment were made by other employees and no corrective action was taken by DOL beyond investigating and making recommendations. Whether DOL's investigation and follow-up constituted reasonable care remains a question of fact. As for the second element, Finn-Verburg has adduced evidence that other female employees had made complaints against Alley, to no avail. She has also adduced evidence that other female employees who had made complaints against Alley were retaliated against by him for having done so. Having been aware of the prior complaints, the lack of corrective action by DOL, and the retaliation by Alley, she contends that she felt it would be futile to file a complaint at that time. Accordingly, a question of fact remains as to whether the delay in Finn-Verburg's making a complaint constituted an unreasonable failure to take advantage of the corrective opportunity presented by DOL. D. Retaliation A plaintiff may establish a prima facie case of retaliation under Title VII by showing "(1) participation in a protected activity that is known to the defendant, (2) an employment decision or action disadvantaging the plaintiff, and (3) a causal connection between the protected activity and the adverse decision." Richardson, 180 F.3d at 443. Once a plaintiff establishes a prima facie case, the burden shifts to the defendant to set forth evidence of a legitimate, non-retaliatory explanation for the employment action. Id. If the defendant is successful in meeting its burden, then the "plaintiff must demonstrate that there is sufficient potential proof for a reasonable jury to find the proffered legitimate reason merely a pretext for impermissible retaliation." Id. In filing a complaint with the DEOD in June 1997, the plaintiff clearly participated in a protected activity.[2] However, the plaintiff has failed to show that as a result of this filing, there was any employment decision which disadvantaged her. The only tangible employment act which she contends that she suffered was a "constructive discharge" when she took a 335 reduction in hours in order to limit her contact with Alley.[3] First, this occurred in 1992, five years before she filed her complaint. Second, this was not a decision of the defendant, but the plaintiff's own decision. Therefore, there can be no causal connection between the protected activity and any adverse decision of the defendant. The plaintiff has failed to establish a prima facie case of retaliation. Therefore, this claim must be dismissed. E. State Human Rights Law Claims Eleventh Amendment Bar Defendant contends that plaintiffs New York Human Rights Law claims are barred by the Eleventh Amendment. Plaintiff makes no contrary argument. All claims against New York State brought under 42 U.S.C. § 1983, the New York Civil Service Law, the New York Human Rights Law, and New York common law (such as intentional infliction of emotional distress) are barred by sovereign immunity. Lambert v. New York State Office of Mental Health, No. 97-CV-1347, 2000 WL 863461, at *7 (E.D.N.Y. June 9, 2000). IV. CONCLUSION A genuine issue of fact exists as to whether the hostile work environment at DOL was based upon Finn-Verburg's gender. Genuine issues of material fact also exist as to both elements of defendant's affirmative defense under Faragher. Otherwise, the remaining claims must be dismissed. Accordingly it is ORDERED that 1. Defendant's motion is GRANTED in part, and DENIED in part; 2. All claims pursuant to 42 U.S.C. § 1983, New York Civil Service Law, New York Human Rights Law, and New York common law are DISMISSED; 3. The retaliation claim pursuant to Title VII, 42 U.S.C. § 2000e, is DISMISSED; and 4. The motion to dismiss the claims of hostile work environment and sexual harassment pursuant to Title VII, 42 U.S.C. § 2000e, is DENIED. IT IS SO ORDERED. NOTES [1] There is no genuine issue as to whether a hostile work environment existed. For example, defendant asserts as undisputed fact that Alley's management style is "very aggressive and intrusive," and that Alley "has a problem with everybody." (Def.'s L.R. 7.1 Statement ¶ 23, 28.) Rather, what is in dispute is whether the hostile work environment affected both males and females equally, or whether it was based upon one's gender. See id. ¶ 22, 24, 27. [2] Plaintiff alleges that the "protected activity" was participating in an investigation of a complaint made by a coworker (Schmidt). She gave a statement in 1995. However, plaintiff has not set forth any facts to demonstrate that Alley's behavior changed in any manner because of that participation. According to plaintiff, it was equally hostile at all times. Neither does she set forth evidence of any adverse decision by the DOL as a result of that statement. The failure of the DOL to take action against Alley in response to the Schmidt complaint may be evidence against the defendant for allowing a hostile work environment to continue or to justify plaintiff's delay in filing her own complaint. However, without more, it is not evidence of retaliation against Finn-Verburg. [3] The vague allegations of a promotional opportunity in June 2000 fall far short of creating an issue of fact. They neither establish an adverse employment decision, nor a causal connection between it and plaintiff's statement in the Schmidt matter in 1995, or her complaint in 1997.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2987407/	Order filed March 21, 2013 In The Fourteenth Court of Appeals ____________ NO. 14-13-00080-CV ____________ RR MALOAN INVESTMENTS, INCL., Appellant V. NEW HGE, INC., Appellee On Appeal from the County Civil Court at Law No. 4 Harris County, Texas Trial Court Cause No. 10117755 ORDER Appellant’s brief was due March 8, 2013. No brief or motion for extension of time has been filed. Unless appellant submits a brief to the clerk of this court on or before April 22, 2013, the court will dismiss the appeal for want of prosecution. See Tex. R. App. P. 42.3(b). PER CURIAM	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/2687086/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA RANDOLPH JACKSON, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1909 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 16, 2014. An appeal from the Circuit Court for Alachua County. Mark W. Mosley, Judge. Randolph Jackson, pro se, Appellant. Pamela Jo Bondi, Attorney General, and Giselle D. Lylen, Assistant Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. VAN NORTWICK, CLARK, and SWANSON, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/2687089/	IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA CLENTIS E. LUCUSS, NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND Appellant, DISPOSITION THEREOF IF FILED v. CASE NO. 1D14-1982 STATE OF FLORIDA, Appellee. _____________________________/ Opinion filed July 10, 2014. An appeal from the Circuit Court for Bay County. James B. Fensom, Judge. Clentis E. Lucuss, pro se, Appellant. Pamela Jo Bondi, Attorney General, and Justin Chapman, Assistant Attorney General, Tallahassee, for Appellee. PER CURIAM. AFFIRMED. WOLF, ROBERTS, and ROWE, JJ., CONCUR.	01-03-2023	07-31-2014
https://www.courtlistener.com/api/rest/v3/opinions/2850778/	COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 2-05-225-CV FINOVA CAPITAL CORPORATION APPELLANT V. JOE B. RUPE, O.D., P.C. AND JOE B. RUPE APPELLEES ---------- FROM THE 78 TH DISTRICT COURT OF WICHITA COUNTY ---------- MEMORANDUM OPINION (footnote: 1) AND JUDGMENT ---------- We have considered “Appellant, Finova Capital Corporation’s Motion To Dismiss.” It is the court’s opinion that the motion should be granted; therefore, we dismiss the appeal. See T EX. R. A PP. P. 42.1(a)(1), 43.2(f). Costs of the appeal shall be paid by the party incurring the same, for which let execution issue. PER CURIAM PANEL D: LIVINGSTON, DAUPHINOT, and HOLMAN, JJ. DELIVERED: January 26, 2006 FOOTNOTES 1:See Tex. R. App. P. 47.4.	01-03-2023	09-03-2015
https://www.courtlistener.com/api/rest/v3/opinions/2994095/	In the United States Court of Appeals For the Seventh Circuit No. 99-1676 United States of America, Plaintiff-Appellee, v. Roger G. Galbraith, Defendant-Appellant. Appeal from the United States District Court for the Southern District of Illinois. No. 97 CR 40069--J. Phil Gilbert, Chief Judge. Argued October 1, 1999--Decided January 11, 2000 Before Cudahy, Easterbrook and Kanne, Circuit Judges. Cudahy, Circuit Judge. In October 1997, the Drug Enforcement Agency (DEA) received a tip that Roger Galbraith was manufacturing methamphetamine at his home in Cisne, Illinois. Acting on that tip, agents went to Galbraith’s home where they found significant evidence of drug production. The agents waited at the home, interviewed Galbraith when he arrived, and later arrested him. Galbraith moved to suppress evidence gathered and statements given at the officers’ original search; his motion was denied. Galbraith pleaded "not guilty," but changed his plea after jury selection began. The trial judge sentenced him on the basis of statements given by his codefendants and others. The judge enhanced Galbraith’s offense level for obstruction of justice, and denied Galbraith’s requests for sentence reductions based on acceptance of responsibility and application of the United States Sentencing Guidelines’ so-called safety valve provision. Galbraith now appeals the denial of the motion to suppress, the judge’s calculation of his relevant conduct, the obstruction of justice enhancement and the denials of his two requests for sentence reduction. We do not reach the merits of the suppression issue, and we affirm on all other issues. I. Facts On October 31, 1997, officers from the county sheriff’s department and the DEA went to Galbraith’s home. Galbraith lived in a house trailer, and maintained on his land a small cinder block building near the road and a shed closer to the residence. The officers smelled ammonia and other odors associated with methamphetamine manufacture. They traced the odors to the cinder block building, put on protective suits and breathing devices, and entered the building. There, they found methamphetamine production apparatus. They then approached the residence, but before reaching it, smelled ammonia and ether fumes coming from the shed. An agent later testified that the shed was open. Looking inside, the agent saw a tank leaking ammonia. He also saw Coleman fuel and empty ether cans. All are used in methamphetamine production. Next, the agents noticed ether and ammonia smells near the residence. When they examined the house, they saw a hose stuck in the front door, and heard rustling. The agents testified that they were concerned that occupants of the home might be in trouble because ether and ammonia can be dangerous. They entered the home, and found it empty, but noticed two jars that appeared to contain methamphetamine. About three hours later, the Galbraiths drove onto their land. What happened next is disputed. Galbraith contends that he was immediately handcuffed. He also notes that two agents present at the scene have different recollections about whether the officers drew their guns, and when the officers read Galbraith and his wife their Miranda rights. The government contends that both were read their rights, waived them and were interviewed by the agents and released. The government arrested Galbraith in November 1997, and he was released on bond. The government later moved to revoke the bond because Galbraith had allegedly continued to manufacture methamphetamine after his arrest. Galbraith was taken into custody on April 16, 1998. He moved to suppress evidence seized from his residence during the search described above. Galbraith also moved to suppress the statement he gave on that day. The trial court denied both motions. On April 23, a grand jury returned a two-count indictment naming Galbraith, his wife and five others as defendants. Count one alleged a conspiracy with six codefendants and two others indicted in related proceedings to possess and distribute methamphetamine in violation of 21 U.S.C. sec.sec. 841(a)(1) and 846. Count two alleged conspiracy to manufacture methamphetamine, in violation of the same provisions. Galbraith initially opted for trial, but changed his mind after jury selection began. At that point, he entered an unconditional plea of guilty to both counts. He was sentenced on March 3, 1999. At the sentencing hearing, DEA agent Christopher Hoyt was the government’s sole witness. Hoyt established the amount of drugs Galbraith was responsible for based on Galbraith’s post-search interview and the statements of two codefendants. In addition, Hoyt related the statements of a third man, George Songer, who claimed knowledge of additional drug amounts. Galbraith disputes the reliability of Songer’s statement. At sentencing, the judge accepted Songer’s statement and used it to raise Galbraith’s relevant conduct calculation. He also enhanced Galbraith’s offense level by two levels for obstruction of justice, denied a two-level downward adjustment for acceptance of responsibility and found Galbraith ineligible for the safety valve provisions of United States Sentencing Guidelines section 5C1.2. Ultimately, the judge sentenced Galbraith to 151 months in prison. Galbraith now appeals the denial of his motion to suppress, the calculation of his relevant conduct, the obstruction of justice enhancement, the denial of his downward adjustment for acceptance of responsibility and the denial of safety valve treatment. We do not reach the merits of the motion to suppress, and we affirm the trial court on the remainder of the issues. II. Analysis A. Motion to Suppress Galbraith contends that the court below erred by denying his motion to suppress evidence seized from his property and to suppress the statement he gave on the day of the search. He argues that because the officers had no warrant, they were not entitled to go onto his land. He further argues that the exigent circumstances exception to the warrant requirement is not available to the officers because the situation was not sufficiently urgent to justify immediate action. The evidence was inadmissible because it was obtained in violation of the Fourth Amendment, he argues. And his post-search statement was inadmissible fruit of the poisonous tree. Whether or not these arguments have merit, Galbraith foreclosed his right to raise them when he entered an unconditional plea of guilty to the charges. He did not, as permitted by Federal Rule of Criminal Procedure 11, reserve the right to seek appellate review of the denied motion to suppress. See Fed. R. Crim. P. 11(a)(2). "[A] guilty plea constitutes a waiver of non- jurisdictional defects occurring prior to the plea. . . . This waiver includes Fourth Amendment claims." United States v. Cain, 155 F.3d 840, 842 (7th Cir. 1998) (citations omitted). Galbraith cites United States v. Yasak for the proposition that a guilty plea may not always amount to a waiver. 884 F.2d 996, 1000 (7th Cir 1989). But all we stated in Yasak was that the court could consider statements of conditionality at a defendant’s plea hearing even if there was no written conditional plea, or was a written unconditional plea. 884 F.2d at 999-1000. A review of the transcript from Galbraith’s plea hearing merely reaffirms that Galbraith’s guilty plea was unconditional. Because Galbraith waived his right to appeal the suppression issue by entering this unconditional plea, we will not review his Fourth Amendment claims. See Cain, 155 F.3d at 842; see also United States v. Newman, 148 F.3d 871, 879 (7th Cir. 1998) (relinquishment of known rights constitutes waiver, which extinguishes appellate review, while rights forfeited by failure to raise them timely may be reviewed for plain error). B. Relevant Conduct Calculation Under the Sentencing Guidelines, the relevant conduct of one charged with manufacture, possession and distribution of drugs depends on the quantity of drugs manufactured, possessed and distributed. See U.S.S.G. sec.sec. 2D1.1 (a)(3), (c)./1 At sentencing, DEA Agent Hoyt testified to statements given by Galbraith and Rodney Calhoun, a defendant in a related conspiracy case, which established that Galbraith had produced 361.46 grams of methamphetamine. Then Hoyt testified to statements given by codefendants Harlis Moulton, John Bierman and a third man, David Wood, which corroborated that amount. Next, Hoyt testified to two statements given by George Songer, who was introduced to Galbraith by codefendant Wood and bought methamphetamine from Wood starting in late 1996. According to Hoyt, some time after Galbraith’s arrest, Galbraith asked Songer if he could cook methamphetamine at Songer’s home. Hoyt related Songer’s description of these sessions, and reported that Galbraith eventually taught Songer how to cook methamphetamine. In exchange for this tutorial, Songer alleged that he gave Galbraith a Ford Falcon, a motor and a chain saw. Hoyt testified that in total Songer saw Galbraith produce 148.83 grams of methamphetamine in addition to the amount established by Calhoun and those who corroborated his testimony. Hoyt also testified that in the second of the two interviews, Songer reported receiving a total of between 30 and 60 ounces (850.5 to 1701 grams) of Galbraith’s methamphetamine. It is not clear whether he received this methamphetamine directly from Galbraith or through intermediate dealers. The prosecutor did not rely on Songer’s statements regarding either the 148 grams or the 850 to 1700 grams when calculating the drug amount constituting Galbraith’s relevant conduct. The prosecutor stated that "[o]ur position will be that [the drug amount] falls between the 350 to 500 in accordance with the PSI. . . . Roger Galbraith establishes more than . . . 350 grams. That’s corroborated by Calhoun. . . . If you put Songer in, it puts him nine grams over the 500, but I’m willing to concede that." Sent. Tr. at 47. The trial court, however, did rely on Songer’s statements, noting that "[h]ere we have a Probation report that establishes relevant conduct between 350 and 500 grams, and yet I’m provided evidence that it’s clearly over 500 grams. . . . [T]here’s nothing to counter Songer here. The evidence that’s produced is such that I don’t see how this Court can make a finding below 500 grams. The evidence is clearly that it’s over 500 grams." Sent. Tr. at 54. Later, speaking to Galbraith’s attorney, the trial court stated: "[Y]our client takes the position that he doesn’t even know Songer in his objections. And yet at this hearing I have been presented no evidence that he didn’t know him. Your client’s elected not to testify. If he was so convinced with his position and so sure of it, he probably would have testified. I’m not holding that against him. I’m just saying that I have evidence that this thing is over 500 grams." Sent. Tr. at 56. As a result of holding Galbraith responsible for more than 500 grams, the judge was required under the Sentencing Guidelines to place Galbraith’s base offense level at 32 rather than 30. Galbraith challenges the trial court’s decision to credit information provided by George Songer./2 The district court’s determination of the quantity of drugs involved in a defendant’s conduct is a finding of fact reviewed for clear error. United States v. Lanterman, 76 F.3d 158, 160 (7th Cir. 1996). We will reverse a district court’s conclusion regarding drug amount only if "after reviewing the record, we are left with the firm and definite conviction that a mistake has been made." Id. (quoting United States v. Corral- Ibarra, 25 F.3d 430, 437 (7th Cir. 1994)). The government has a considerable advantage in proving a defendant’s relevant conduct. At sentencing it must prove the quantity of drugs only by a preponderance of the evidence. Lanterman, 76 F.3d at 160. Further, the Federal Rules of Evidence do not apply at sentencing, meaning the court may consider hearsay evidence and other information not admissible at trial. United States v. McEntire, 153 F.3d 424, 435 (7th Cir. 1998). Not only procedural but also substantive advantages go to the government in the contest over calculating relevant drug conduct. For instance, the testimony of just one witness, even a potentially biased witness, is sufficient to support a finding of fact. See United States v. Cedano-Rojas, 999 F.2d 1175, 1180 (7th Cir. 1993). Further, the trial court is entitled to credit testimony that is "totally uncorroborated and comes from an admitted liar, convicted felon, large scale drug-dealing, paid government informant." McEntire, 153 F.3d at 436 (quoting United States v. Garcia, 66 F.3d 851, 857 (7th Cir. 1995)). There is one significant counterweight to these government advantages: the defendant has a due process right to be sentenced on the basis of reliable information. See Lanterman, 76 F.3d at 160. We have suggested that inconsistent evidence may be unreliable. See McEntire, 153 F.3d at 436. When evidence is inconsistent, the district court must undertake a "sufficiently searching inquiry into the government’s evidence to ensure its probable accuracy." Id. This inquiry is particularly warranted where a witness has a history of drug use and admits his memory is not sharp. See id. (collecting cases). For instance, in McEntire, a witness offering information on the defendant’s relevant conduct first stated in a proffer that he gave the defendant 50 pounds of methamphetamine; he then testified at trial that he gave the defendant 80 to 100 pounds; the witness later signed an affidavit stating that he could not estimate the amount, and then he stated at a sentencing hearing that he gave him more than 100 pounds. Id. The witness admitted that he used "a lot" of methamphetamine and that it sometimes affected his memory. Id. The trial court accepted the 80 to 100 pound estimate without specifying why that was the most reliable estimate, and we reversed and remanded for a more searching inquiry. Similarly, in United States v. Beler, 20 F.3d 1428 (7th Cir. 1994), a witness to relevant conduct first stated that he purchased 150 to 200 ounces of cocaine from the defendant, then disclaimed any ability to pinpoint an amount, and finally set the amount at 15 to 20 ounces. See id. at 1430-33. We found the judge’s decision to credit the smaller amount unacceptable because he failed to explore the factual basis for these bare estimates. See id. at 1433-34. Similarly, in McEntire, we rejected as unreliable a witness’s "conclusory estimates . . . not supported . . . with any further explanations or details as to how he arrived at the amounts." 153 F.3d at 437. Thus, consistent facts, details and explanations suggest the reliability we require before crediting one of several inconsistent statements. Galbraith complains that Songer had been convicted of prior drug offenses, and was facing possible drug charges himself. He also decries the fact that Songer’s testimony was uncorroborated. These facts do not necessarily render him unreliable. See, e.g., Cedano-Rojas, 999 F.2d at 1180 (testimony of one biased witness may be sufficient to support a finding of fact); McEntire, 153 F.3d at 436 (trial court may credit uncorroborated testimony of a convicted felon and government informant). We are more disturbed by the fact that Songer’s two interviews yielded vastly different information. In Songer’s first interview, he stated that Galbraith cooked about six ounces of methamphetamine in his home. No mention was made of additional drugs procured through Galbraith. In the second interview, Songer again stated that Galbraith cooked between six and eight ounces of methamphetamine. He added, however, that he had purchased between 30 and 60 ounces of methamphetamine produced by Galbraith. Songer’s initial silence and later loquaciousness on this score are troubling though not, strictly speaking, contradictory. The wide gulf between these stories, coupled with Songer’s admitted heavy drug use--he became addicted to hallucinogenic drugs at age 15; to methamphetamine at age 18, to cocaine powder at age 20, to crack cocaine at age 35 and apparently used between 850 and 1700 grams of methamphetamine during the period in question-- suggest that the trial court might have performed a more searching inquiry than it did. The judge noted the discrepancy, and decided to credit Songer’s statement about the 148 grams, but not the larger amount. He did not explain why he found the latter statement reliable but the former suspicious. Given the government’s disavowal of Songer’s entire statement, an explanation demonstrating the judge’s scrutiny of the evidence might have been advisable. Nevertheless, after reviewing the record as we are directed to do by Corral-Ibarra, 25 F.3d at 437, we are not left with a definite and firm conviction that the judge was mistaken to credit the testimony on the 148 grams but not on the larger amount. The testimony regarding the 148 grams bore indicia of reliability--facts and details--that were missing from the statement regarding the larger amount. Songer twice told officers that he observed Galbraith cook approximately this amount of methamphetamine in his home. He specified exact quantities cooked at various times. He described the ingredients used each time, and explained who provided those ingredients. He told officers about the items he gave Galbraith in exchange for the cooking lessons, including a car./3 This detailed testimony was far more reliable than the mere conclusions rejected in McEntire and Beler. In contrast, Songer estimated just once, and in passing, that he purchased between 30 and 60 grams of Galbraith’s methamphetamine. He did not specify the quantities he purchased on various dates, or the locations of the purchases. Further, his statement suggests that he did not purchase all of the drugs directly from Galbraith, but instead through intermediate dealers. Therefore, Songer could very likely have misunderstood who supplied the drugs to his dealer. This single, isolated statement, like those rejected in McEntire and Beler, did not bear sufficient indicia of reliability. The judge was correct to ignore it. We are, therefore, not left with the conviction that the trial judge made a mistake in crediting Songer’s testimony on the 148 grams. There was no clear error in the relevant conduct calculation, and we affirm it. C. Obstruction of Justice Galbraith also contests the trial judge’s decision to enhance his sentence two levels for obstruction of justice as provided for in section 3C1.1 of the Guidelines. The Presentence Investigation Report (PSR) recommended the enhancement because of Galbraith’s alleged perjury at the suppression hearing. Galbraith did not object below to this enhancement, and thus we review the judge’s decision to enhance under the plain error standard. See United States v. Santoro, 159 F.3d 318, 320-21 (7th Cir. 1998). "A plain error is not only a clear error but an error likely to have made a difference in the judgment, so that failure to correct it could result in a miscarriage of justice, that is, in the . . . imposition of an erroneous sentence." Newman, 965 F.2d at 213. If a defendant does not object to the enhancement at the time of sentencing, the judge is entitled to adopt the PSR’s findings without making independent findings on the record. See Fed. R. Crim. P. 32(b)(6)(D) ("Except for any unresolved objection . . . the court may, at the [sentencing] hearing, accept the presentence report as its findings of fact."). See also United States v. Dunnigan, 507 U.S. 87, 95 (1993) ("[I]f a defendant objects to a sentence enhancement resulting from her trial testimony, a district court must review the evidence and make independent findings . . . ."). Galbraith did not object to the enhancement at sentencing, and the judge both adopted the PSR and took judicial notice of the suppression hearing at which the alleged perjury took place. We take Galbraith’s specific challenges in logical order. First, Galbraith argues in essence that two of his alleged perjurious statements (that officers did not read his Miranda rights, and threatened him to alter the content of his statement) were not false at all. Instead, he posits, the trial judge wrongly credited the government’s version of events rather than his own. Naturally, we review the trial court’s credibility determination with great deference. See, e.g., United States v. Agostino, 132 F.3d 1183, 1198 (7th Cir. 1997). The judge below heard the testimony and decided whom to believe, and in light of Galbraith’s subsequent turnaround on several of these issues, we cannot say this decision was erroneous. Second, Galbraith complains that, even if his statements were false, the judge did not follow the proper procedure and go on to find that the falsehoods were material and willful. As discussed above, the judge needed only to adopt the PSR’s findings to satisfy the requirements of Dunnigan. The PSR did not include a specific finding of materiality. Because Galbraith did not dispute the enhancement, this failure is reviewed for plain error. That is, we ask whether the record’s silence on materiality was likely to have made a difference in the judgment. See Newman, 965 F.2d at 213. Here, because the PSR specifically detailed the falsehoods and the context constituting perjury, the judge was not prevented from drawing a meaningful conclusion about materiality. Further, the judge himself presided at the suppression hearing and took judicial notice of that hearing at the sentencing proceeding. The judge was better qualified than the author of the PSR to assess the materiality of Galbraith’s perjury, and the PSR’s silence did not affect the judgment or amount to plain error. Next, Galbraith argues that, on the merits, his falsehoods were not material. We have stated that false testimony is material if it is "’designed to substantially affect the outcome of the case.’" United States v. Parker, 25 F.3d 442, 448 (7th Cir. 1994) (quoting Dunnigan, 507 U.S. at 95). In both Parker and Dunnigan, the lies at issue were alleged to have had a bearing on the final outcome of the case, namely the defendant’s guilt or innocence. The situation here is slightly different, because Galbraith testified falsely at a suppression hearing rather than a trial. Thus, in a strict sense even the most blatant falsehood he told would have had a direct effect only on the judge’s evidentiary ruling and at best an indirect effect on the outcome of the case. Notably, however, the Sentencing Guidelines define materiality for non-perjurious false statements to law enforcement officers or probation officers as those that if believed would affect the issue under determination. See U.S.S.G. sec. 3C1.1, Application Note 5. This definition essentially applies the Dunnigan "outcome of the case" standard to lies in settings where something less ultimate than guilt or innocence is at stake. Further, logic dictates that a lie influencing a pretrial issue will, in an attenuated sense, influence the ultimate outcome of the case itself. Thus, both Dunnigan and the Guidelines suggest that a falsehood told at a pretrial hearing is material if it is calculated to substantially affect the issue under determination at that hearing. This result was foreshadowed by United States v. Emenogha, 1 F.3d 473, 485 (7th Cir. 1993), in which we affirmed the district court’s application of an obstruction of justice enhancement based on perjury at a pretrial hearing. In Emenogha, the defendant stated at a suppression hearing that prior to executing a consent to search form, he and his family had been threatened by law enforcement officers. This lie was perjury because if believed it would have negated the defendant’s consent and perhaps rendered the search unconstitutional and its fruits inadmissible. Galbraith told two similar lies that if believed would have influenced the outcome of the suppression hearing. He told the court that on the day of the search, law enforcement officers did not read him his Miranda rights before he gave a statement. See Suppression Hrg. Tr. at 110. And he told the court that law enforcement officers threatened him with jail in order to make him alter the content of his statement. See id. The trial court, in its Memorandum and Order denying the motion to suppress, specifically stated that in deciding whether to admit Galbraith’s statement, "[t]he only question for the Court . . . is whether the defendants were informed of their Miranda rights." Mem. at 8. Obviously, if this was the only question, and the trial judge had believed Galbraith’s version of events, he might well have suppressed Galbraith’s statement. Therefore, at least two of Galbraith’s falsehoods at the suppression hearing were designed to influence the outcome of the issue under determination, namely the admission of the statements. Other falsehoods, regarding the manufacturing operation in his home in the month before the search, were not obviously relevant to the outcome of the suppression hearing, and were not material./4 Galbraith next argues that the PSR erred in finding the falsehoods willful. Galbraith argues persuasively that several of the "false" statements identified in the PSR merely reflect his inability to follow the prosecutor’s compound or complex questions. But the "confused" statements were the ones concerning Galbraith’s pre-arrest drug activity, which would have no influence on the outcome of the motion to suppress and were therefore immaterial. Galbraith’s material falsehoods, regarding the Miranda warnings and the officers’ threats, were offered in response to simple questions posed by his own attorney./5 Galbraith’s confusion on immaterial issues does not offset his willful untruths on material issues, and the finding of perjury was not plainly erroneous. The perjury finding justified the obstruction of justice enhancement, which we affirm. D. Acceptance of Responsibility Galbraith next appeals the district court’s finding that he failed to accept responsibility and therefore did not qualify for the two-level reduction in base offense level offered by the Sentencing Guidelines. See U.S.S.G. sec. 3E1.1 (two-level decrease if "defendant clearly demonstrates acceptance of responsibility for his offense"). Whether a defendant has accepted responsibility is a factual determination that the trial court is to make as a result of its conclusions about the defendant’s conduct and credibility. United States v. Scott, 145 F.3d 878, 885 (7th Cir. 1998). We review a trial court’s findings on acceptance of responsibility for clear error. See id. The Guidelines specifically state that "timely" notice of the intention to enter a guilty plea is a clear demonstration of acceptance of responsibility. See U.S.S.G. sec. 3E1.1(b)(2). Conversely, last-minute guilty pleas do not demonstrate the requisite acceptance. See, e.g., United States v. Ewing, 129 F.3d 430, 436 (7th Cir. 1997) (affirming denial where defendant pleaded guilty on last business day before start of trial). Galbraith waited until jury selection was underway before pleading guilty. This plea was nothing if not last-minute, and therefore the trial court’s finding that it did not demonstrate acceptance of responsibility was not error. The judge also noted that Galbraith had obstructed justice, a finding that ordinarily is inconsistent with acceptance of responsibility. See, e.g., Ewing, 129 F.3d at 435. Occasionally, in an extraordinary situation, a defendant may initially obstruct justice and later accept responsibility. See id. Here, however, after his performance at the suppression hearing, Galbraith declined to submit to additional interviews with the government and maintained his "not guilty" plea until the eleventh hour. The situation was ordinary, and the obstruction of justice enhancement is further support for our conclusion that the judge did not err in denying the "acceptance of responsibility" reduction to Galbraith. E. Safety Valve Reduction Finally, Galbraith contends that the judge erred by refusing to apply the provisions of section 5C1.2 of the Guidelines, known as the "safety valve" provision. Under this provision and U.S.S.G. sec. 2D1.1(b)(6), if Galbraith met five specific criteria, the court could lower his offense level by two. The defendant bears the burden of proving he is eligible for the safety valve reduction. See United States v. Ramirez, 94 F.3d 1095, 1099-1102 (7th Cir. 1996). We review the trial court’s finding on this issue for clear error. United States v. Ramunno, 133 F.3d 476, 482 (7th Cir. 1998). The trial court found that Galbraith foundered on the fifth criteria: "not later than the time of the sentencing hearing, the defendant [must] truthfully provide[ ] to the Government all information and evidence the defendant has concerning the offense or offenses that were part of the same course of conduct or of a common scheme or plan . . . ." See U.S.S.G. sec. 5C1.2(5). Galbraith gave one statement to law enforcement agents, on the day his home was searched. Following that, he did not make a proffer and did not expand on his initial statement regarding his codefendants. The proffers of his codefendants suggest that Galbraith was not forthcoming in his post-arrest interview. The judge’s finding that Galbraith did not truthfully provide all information he had was not clearly erroneous, and we affirm it. III. Conclusion In sum, we dismiss Galbraith’s challenge to the denial of the motion to suppress. We affirm the trial court’s relevant conduct determination, the two-level enhancement for obstruction of justice, the denial of the acceptance of responsibility reduction and the denial of the safety valve provision. Affirmed. /1 All citations are to the 1997 Sentencing Guidelines, since those are the Guidelines the trial court found applicable. /2 A second matter of calculation is unchallenged. The Presentence Investigation Report states that Calhoun tied Galbraith to between 212.62 to 240.97 grams of methamphetamine. At the sentencing hearing, however, Hoyt presented Calhoun’s testimony regarding a much larger amount--361.46 grams. Apparently, this larger amount included some methamphetamine that Calhoun produced on his own. Hoyt testified that Calhoun was "directly involved with" Galbraith for the "joint purpose of manufacturing methamphetamine." Sent. Tr. at 17-18. Galbraith himself stated in his one interview with police that he provided Calhoun with cold pills needed to make the drug and knew Calhoun made methamphetamine on his land and elsewhere. Galbraith’s attorney did not object at sentencing to the government’s larger offer of proof, and admitted in his brief to this court that "the government met its burden on . . . 360 grams." Appellant’s Br. at 22. Therefore, Galbraith has waived this issue, and we will not disturb it. See United States v. Newman, 148 F.3d 871, 879 (7th Cir. 1998). For the record, the Guidelines determine relevant conduct of a conspirator with reference to "all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity." U.S.S.G. sec. 1B1.3(a)(1)(B). The testimony that Galbraith acted jointly with Calhoun, and Galbraith’s own statements suggest that he could reasonably foresee Calhoun’s independent drug production; therefore, the entire 361.46 grams was properly included in Galbraith’s relevant conduct. /3 Unfortunately, as Galbraith points out, the government did not try to locate the car to corroborate Songer’s story. However, because uncorroborated testimony is not necessarily unreliable, this oversight is not important. /4 Galbraith now argues that if the search of his home prior to his arrest was conducted in violation of the Fourth Amendment, his statements were fruit of the poisonous tree whether or not he was read his Miranda rights, thus rendering his falsehood on this point at the suppression hearing immaterial. This logic is, of course, specious. Materiality turns on a statement’s effect if believed. When Galbraith spoke, the legality of the search and the admissibility of his post-search statements were both under review. Therefore, when Galbraith spoke, it was possible the judge would find the search legal. If so, his belief in Galbraith’s lies about the Miranda warnings would have influenced his decision whether to suppress the post-search statements. Thus, at the time Galbraith made them, and still today, the falsehoods were material. /5 Mr. Isaacson: Were you ever read those rights that day? Galbraith: No, sir. . . . Mr. Isaacson: Did [the officers] tell you anything before you made any statements? Galbraith: That if I didn’t tell them what they wanted to hear that I would do life in jail. Suppression Hrg. Tr. at 110.	01-03-2023	09-24-2015
https://www.courtlistener.com/api/rest/v3/opinions/4555664/	18-2819 Whitaker v. Department of Commerce In the United States Court of Appeals For the Second Circuit ________ AUGUST TERM, 2019 ARGUED: SEPTEMBER 3, 2019 DECIDED: AUGUST 14, 2020 No. 18-2819 STEPHEN WHITAKER, DAVID GRAM, AND ALL SIMILARLY SITUATED PARTIES, Plaintiffs-Appellants, v. DEPARTMENT OF COMMERCE, Defendant-Appellee. ________ Appeal from the United States District Court for the District of Vermont. ________ Before: WALKER, LOHIER, AND CARNEY, Circuit Judges. ________ This case arises from plaintiffs’ Freedom of Information Act 1 (FOIA) requests for records from the Department of Commerce 1 5 U.S.C. § 552. 2 No. 18-2819 (DOC); the National Telecommunications and Information Administration (NTIA), an agency within the DOC; and the First Responder Network Authority (FirstNet), an independent entity within the NTIA. Plaintiffs appeal from a decision of the United States District Court for the District of Vermont (Crawford, J.) dismissing their claims in part and granting summary judgment for defendant in part. We hold that the district court did not err in concluding that (i) FirstNet is not subject to FOIA and that (ii) an agency need not search for records if it has reasonably determined that a search would be futile. We therefore AFFIRM. ________ KELLY MCCLANAHAN, National Security Counselors, Rockville, MD, for Plaintiffs- Appellants. LAURA E. MYRON, Attorney, Appellate Staff, Civil Division, U.S. Department of Justice (Joseph H. Hunt, Mark B. Stern, on the brief), for Christina E. Nolan, United States Attorney, Washington, D.C., for Defendant-Appellee. Daniel W. Wolff, Amanda Shafer Berman, Crowell & Moring LLP, Washington, D.C., for amicus curiae AT&T Corporation. ________ JOHN M. WALKER, JR., Circuit Judge: This case arises from plaintiffs’ Freedom of Information Act (FOIA) requests for records from the Department of Commerce (DOC); the National Telecommunications and Information Administration (NTIA), an agency within the DOC; and the First Responder Network Authority (FirstNet), an independent entity 3 No. 18-2819 within the NTIA. Plaintiffs appeal from a decision of the United States District Court for the District of Vermont (Crawford, J.) dismissing their claims in part and granting summary judgment for defendant in part. We hold that the district court did not err in concluding that (i) FirstNet is not subject to FOIA and that (ii) an agency need not search for records if it has reasonably determined that a search would be futile. We therefore AFFIRM. BACKGROUND 2 Plaintiffs’ FOIA requests concerned the operations of FirstNet. FirstNet was created by Congress in 2012 at the recommendation of the 9/11 Commission to oversee the development of a National Public Safety Broadband Network (NPSBN) for first responders. On March 30, 2017, following FirstNet’s request for proposals to build and operate the NPSBN, the bid was awarded to AT&T. AT&T and FirstNet then built an online system called the State Plans Portal (the “Portal”) to fulfill FirstNet’s statutory obligation to inform state governments about AT&T’s winning proposal so that each state could make an informed decision about whether to opt into the national network or receive federal funding to create its own alternative network. 3 On June 19, 2017, FirstNet released plans for the NPSBN through the Portal. State governments had 45 days to review the plans and provide any feedback. On September 29, 2017, a 90-day period began during which states were required either to opt in or out of the national network. That period ended on December 28, 2017. Between September 1 and October 5, 2017, plaintiffs submitted six FOIA requests. The first three requests, submitted to FirstNet, the 2 This statement of background facts is drawn from the record and is uncontested by the parties. 3 See 47 U.S.C. § 1442(e). 4 No. 18-2819 NTIA, and the DOC on September 1, sought user comments submitted to the Portal, communications that the agencies considered to be agreements from states to opt into the national network, and any contracts, agreements, and memoranda of understanding with AT&T. The fourth and fifth requests, submitted to FirstNet, the NTIA, and the DOC on September 25, sought copies of the plans provided to the states and related correspondence and records about the Portal’s terms of use. The sixth request, submitted to FirstNet and the NTIA on October 5, sought correspondence from the states affirmatively opting out of the national network. FirstNet responded to each request with a letter stating that, pursuant to a provision of its enabling statute, 47 U.S.C. § 1426(d)(2), it was exempt from FOIA and therefore had not conducted a search for responsive documents. In response to the September 25 requests, the NTIA produced five unredacted documents concerning the Portal’s terms of use. The NTIA responded to all other requests with letters stating that any responsive records would be FirstNet records, not NTIA records, and therefore that it would transfer the requests to FirstNet for possible discretionary disclosure. The DOC responded to each request with a letter stating the same. 4 On October 6, 2017, plaintiffs commenced the present litigation, alleging eighteen causes of action. Plaintiffs alleged that FirstNet (Counts 1–5), the NTIA (Counts 6–10), and the DOC (Counts 11–15) improperly failed to search for and to produce records in violation of FOIA. Count 16 alleges that, contrary to FirstNet’s interpretation, 47 4 On September 1, 2017, plaintiffs submitted an additional FOIA request to the DOC seeking all privacy impact assessments for FirstNet-affiliated systems. The DOC initially responded the same way it had responded to plaintiffs’ other requests, but it subsequently directed plaintiffs’ counsel to a privacy impact assessment for the “NTIA-035 FirstNet General Support System,” which was available on the DOC’s public website. That FOIA request and the DOC’s response are not a subject of this litigation. 5 No. 18-2819 U.S.C. § 1426(d)(2) does not exempt FirstNet from FOIA and seeks declaratory and injunctive relief. Count 17 alleges that the NTIA and the DOC have a policy or practice, in violation of FOIA, of referring to FirstNet all FOIA requests related to FirstNet. Count 18 alleges that the DOC failed to conduct an appropriate privacy impact assessment, as required by § 208 of the E-Government Act of 2002, 5 regarding personal information gathered by FirstNet for the Portal and for the NPSBN. Count 18 seeks an injunction barring FirstNet from collecting personal information until a proper assessment is conducted. The district court dismissed Counts 1–5 and 16 on the basis that a provision of FirstNet’s enabling statute, 47 U.S.C. § 1426(d)(2), exempts FirstNet from FOIA. The district court also granted defendant’s motion for summary judgment on Counts 6–15 and 17 because plaintiffs did not introduce evidence that created a genuine dispute of material fact as to whether the NTIA and the DOC complied with FOIA (Counts 6–15) or whether those agencies had a policy or practice of referring FOIA requests to FirstNet (Count 17). On Count 18, the district court dismissed plaintiffs’ claims as unripe to the extent that they concerned the NPSBN because that system did not yet exist, and it granted summary judgment for defendant to the extent that the claim concerned the Portal. 6 This appeal followed. DISCUSSION On appeal, plaintiffs argue that the district court erred by concluding that (i) FirstNet is not subject to FOIA; (ii) the DOC and NTIA’s decisions not to search for responsive records and to refer plaintiffs’ requests to FirstNet were lawful; and (iii) plaintiffs lack 544 U.S.C. § 3501 note. 6 Plaintiffs state that they “no longer have any interest in the Portal”; their argument on appeal concerns only defendant’s alleged “failure to issue a [privacy impact assessment] for the NPSBN and any related systems.” Plaintiffs-Appellants Br. at 35. 6 No. 18-2819 standing to challenge defendant’s compliance with § 208 of the E-Government Act of 2002 and that Count 18 was not ripe to the extent that it concerned the NPSBN. We review the grant of both a motion to dismiss 7 and a motion for summary judgment 8 de novo. A. FirstNet is exempt from FOIA. The dismissal of Counts 1–5 and 16 on the basis that FirstNet is exempt from FOIA turns on the statutory interpretation of a provision of FirstNet’s enabling statute, 47 U.S.C. § 1426(d)(2). That provision states, in relevant part: (d) . . . Any action taken or decisions made by the First Responder Network Authority shall be exempt from the requirements of— ... (2) chapter 5 of title 5 (commonly referred to as the Administrative Procedure[] Act); . . . Plaintiffs argue that, although FOIA is codified at 5 U.S.C. § 552, within chapter 5 of title 5, § 1426(d)(2) does not exempt FirstNet from FOIA because FOIA is “not commonly referred to as the Administrative Procedure[] Act” (APA). 9 Defendant, in turn, contends that the “commonly referred to” language is simply a parenthetical reminder that does not change the plain meaning of the text exempting FirstNet from the requirements of chapter 5 of title 5. 7 Kelleher v. Fred A. Cook, Inc., 939 F.3d 465, 467 (2d Cir. 2019); Connecticut v. Duncan, 612 F.3d 107, 112 (2d Cir. 2010). 8 Jackson v. Fed. Express, 766 F.3d 189, 193–94 (2d Cir. 2014). 9 Plaintiffs-Appellants Br. at 11. 7 No. 18-2819 We agree with defendant. For any statutory interpretation question, we “begin with the plain language, giving all undefined terms their ordinary meaning while attempting to ascertain how a reasonable reader would understand the statutory text, considered as a whole.” 10 Here, the language of § 1426(d)(2) is unambiguous: FirstNet “shall be exempt from the requirements of . . . chapter 5 of title 5.” It is true, as plaintiffs argue, that the term “APA” is commonly used to refer to that statute’s provisions on rulemaking and judicial review of agency action, rather than to the subset of provisions enacted as part of FOIA. As the district court correctly observed, however, that common usage does not negate that “FOIA is codified in company with the more familiar provisions of the APA within Title 5, Chapter 5.” 11 Although the plain meaning of § 1426(d)(2) is sufficient to end our inquiry, 12 we note that the statutory history of the APA supports our conclusion that FirstNet is exempt from FOIA. To begin, although the term “APA” is not commonly used to refer to FOIA, the Supreme Court has explained that “[t]he statute known as the FOIA is actually a part of the Administrative Procedure Act.” 13 The location of FOIA within the APA was deliberate. Even before Congress enacted FOIA in 1966, the APA contained a “Public Information” provision, § 3, 14 that required agencies to publish any rules, opinions, and orders that 10 Deutsche Bank Nat’l Trust Co. v. Quicken Loans Inc., 810 F.3d 861, 868 (2d Cir. 2015) (internal quotation marks and alterations omitted). 11 App’x 216. 12 See Devine v. United States, 202 F.3d 547, 551 (2d Cir. 2000) (citing Rubin v. United States, 449 U.S. 424, 430 (1981)) (“In the usual case, if the words of a statute are unambiguous, judicial inquiry should end, and the law is interpreted according to the plain meaning of its words.”). 13 U.S. Dep’t of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 754 (1989). 14 Pub. L. No. 79–404, § 3, 60 Stat. 237, 238 (1946). 8 No. 18-2819 affected the public’s rights and obligations. 15 FOIA was enacted expressly “[t]o amend section 3 of the Administrative Procedure Act . . . to clarify and protect the right of the public to information.” 16 In 1967, shortly before FOIA took effect, Congress moved the provisions that comprise FOIA from 5 U.S.C. § 1002 to their current location within the codified version of the APA at 5 U.S.C. § 552. 17 Finally, we reject plaintiffs’ argument that the OPEN FOIA Act of 2009, 18 which amended 5 U.S.C. § 552(b)(3), invalidates statutory FOIA exemptions enacted after 2009 that do not specifically cite subsection (b)(3)(B) of § 552. 19 Section 552(b)(3), known as FOIA 15 See H.R. Rep. No. 79–1980, at 21 (1946). 16 Pub. L. No. 89–487, 80 Stat. 250, 250 (1966); see also Dep’t of the Air Force v. Rose, 425 U.S. 353, 360 (1976) (“The [Freedom of Information] Act revises § 3, the public disclosure section, of the Administrative Procedure Act”); Renegotiation Bd. v. Bannercraft Clothing Co., 415 U.S. 1, 12 (1974) (noting that FOIA “was enacted in 1966 . . . as a revision of § 3 of the Administrative Procedure Act”). 17 See Pub. L. No. 90–23, 81 Stat. 54 (1967). 18 See Pub. L. 111-83, § 564(b), 123 Stat. 2142, 2184 (2009). 19 As amended by the OPEN FOIA Act, § 552(b) states in relevant part: (b) This section does not apply to matters that are— (1) (A) specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy and (B) are in fact properly classified pursuant to such Executive order; (2) related solely to the internal personnel rules and practices of an agency; (3) specifically exempted from disclosure by statute (other than section 552b of this title), if that statute— (A) (i) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue; or (ii) establishes particular criteria for withholding or refers to particular types of matters to be withheld; and (B) if enacted after the date of enactment of the OPEN FOIA Act of 2009, specifically cites to this paragraph. 9 No. 18-2819 Exemption 3, applies to records “specifically exempted from disclosure by statute” when the statute “(i) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue” or “(ii) establishes particular criteria for withholding or refers to particular types of matters to be withheld.” 20 Exemption 3 also requires that a statute enacted after the OPEN FOIA Act of 2009 must “specifically cite[] to this paragraph.” 21 Contrary to plaintiffs’ argument, Exemption 3 does not apply to agencies in their entirety but instead to certain types of records maintained by agencies—that is, to “matters that are . . . specifically exempted from disclosure by statute.” 22 As the district court observed, because 47 U.S.C. § 1426(d)(2) is “not a specific exemption of matters from disclosure, but rather a general exemption of an entire administrative agency from all of the obligations of FOIA,” 23 Exemption 3 has no application here. In light of the plain language of 47 U.S.C. § 1426(d)(2) and the statutory history of the APA, we hold that § 1426(d)(2) exempts FirstNet from FOIA. We therefore affirm the district court’s dismissal of Counts 1–5 and 16. B. An agency need not search for records if it has reasonably determined that a search would be futile. Plaintiffs appeal the district court’s grant of summary judgment for defendant on Counts 6–15. The district court concluded that the NTIA and the DOC—which are not exempt from FOIA— adequately responded to plaintiffs’ FOIA requests. Based on sworn 20 5 U.S.C. § 552(b)(3)(A). 21 Id. § 552(b)(3)(B). 22 Id. § 552(b)(3). 23 App’x 218. 10 No. 18-2819 declarations from NTIA and DOC officials explaining why the agency would not have responsive records, the district court determined that the agency did not violate FOIA by declining to conduct a search. 24 Plaintiffs challenge the district court’s determination that there was no genuine dispute of material fact that a search would be futile, as well as its conclusion that declining to conduct a search was an adequate response to plaintiffs’ FOIA requests. This challenge is unavailing. The legal question is one of first impression in the Second Circuit, as we have not previously defined the circumstances under which an agency may decline to perform a search in response to a FOIA request. The standard applied by the D.C. Circuit, which has particular FOIA expertise, 25 is that when faced with a FOIA request, an agency must conduct an “adequate” search, with “adequacy . . . measured by the reasonableness of the effort in light of the specific request.” 26 To respond “adequately,” an agency must show that “it made a good faith effort to conduct a search for the requested records, using methods which can be reasonably expected to produce the information requested.” 27 24 See id. 219–20. 25 We recognize the D.C. Circuit as “something of a specialist” in adjudicating FOIA cases, “given the nature of much of its caseload.” Brennan Ctr. for Justice at NYU v. U.S. Dep’t of Justice, 697 F.3d 184, 200 (2d Cir. 2012). 26 Larson v. Dep’t of State, 565 F.3d 857, 869 (D.C. Cir. 2009) (internal quotation marks omitted). For our part, our Circuit has determined that a search was “adequate” when it was “reasonably calculated to discover the requested documents.” Grand Cent. P’ship, Inc. v. Cuomo, 166 F.3d 473, 489 (2d Cir. 1999) (quoting SafeCard Servs., Inc. v. S.E.C., 926 F.2d 1197, 1201 (D.C. Cir. 1991)). 27 Oglesby v. U.S. Dep’t of the Army, 920 F.2d 57, 68 (D.C. Cir. 1990). To be an “agency record,” a record must meet two requirements: first, the “agency must either create or obtain the requested material,” and second, it “must be in control of the requested material at the time the FOIA request is made.” U.S. Dep’t of Justice v. Tax Analysts, 492 U.S. 136, 144–45 (1989) (internal quotation marks omitted). 11 No. 18-2819 Drawing primarily from cases within the D.C. Circuit that have considered the circumstances under which an agency may decline to conduct a FOIA search, 28 the district court concluded that “when an agency reasonably determines, based on the nature of the request and the scope of the agency’s operations, that it is unlikely to have responsive records and that a search is likely to be futile, it need not proceed with a search.” 29 That is because, as the district court for the District of Columbia explained in MacLeod v. United States Department of Homeland Security, “[i]t is clear beyond cavil that an agency cannot improperly withhold records that it does not maintain, and that ‘where the Government’s declarations establish that a search would be futile, the reasonable search required by FOIA may be no search at 28 See App’x 220 (citing MacLeod v. U.S. Dep’t of Homeland Sec., No. 15-cv-1792 (KBJ), 2017 WL 4220398 at 11 (D.D.C. Sept. 21, 2017) (“[W]here the Government’s declarations establish that a search would be futile, the reasonable search required by FOIA may be no search at all.”) (quoting Reyes v. U.S. Envtl. Prot. Agency, 991 F. Supp. 2d 20, 27 (D.D.C. 2014)); Jenkins v. U.S. Dep’t of Justice, 263 F. Supp. 3d 231, 235 (D.D.C. 2017) (where an agency demonstrates it is unlikely to possess responsive records, it is not required to conduct a search); Earle v. U.S. Dep’t of Justice, 217 F. Supp. 3d 117, 123–24 (D.D.C. 2016) (granting summary judgment for agency where declarant explained that the agency did not maintain the records sought); Cunningham v. U.S. Dep’t of Justice, 40 F. Supp. 3d 71, 85–86 (D.D.C. 2014) (granting summary judgment for agency where the agency demonstrated that a search would be futile because it does not maintain the requested records); Espino v. U.S. Dep’t of Justice, 869 F. Supp. 2d 25, 28 (D.D.C. 2012) (granting summary judgment to the agency where it submitted “sufficiently detailed and non- conclusory” declarations “to demonstrate the adequacy of its search”); Amnesty Int’l USA v. CIA, No. 07 Civ. 5435 (LAP), 2008 WL 2519908, at 11 (S.D.N.Y. June 19, 2008) (no search required where declarations of agency officers reasonably describe that, based on their knowledge of their offices, they would not have responsive records); Am.-Arab Anti-Discrimination Comm. v. US. Dep’t of Homeland Sec., 516 F. Supp. 2d 83, 88 (D.D.C. 2007) (FOIA does not require a search for records an agency does not maintain)). 29 App’x 221. (Although we conclude that the district court erred by using the more forgiving “likely to be futile” formulation, we also determine that it nonetheless reached the correct conclusion.) 12 No. 18-2819 all.’” 30 The district court for the Southern District of New York likewise concluded in Amnesty International USA v. CIA that “FOIA does not demand a search that would be futile.” 31 We see no reason to depart from the sensible and persuasive approach employed by the courts that have considered this question, and we therefore conclude that an agency need not conduct a search that it has reasonably determined would be futile. Plaintiffs attempt to limit the cases cited by the district court to their facts, arguing that an agency may only decline to conduct a search when (i) no records exist because the subject of the request does not exist, (ii) consultation with knowledgeable agency officials indicates that no records exist because the agency has not engaged with the subject matter, or (iii) the subject matter is plainly beyond the purview of the agency. As the district court observed, however, the “unifying principle” that emerges from the decisions addressing this question is not so limited but instead supports the broader rule that an agency need not conduct a search that it has reasonably determined would be futile. 32 Turning to the application of that standard, we conclude that the district court correctly granted summary judgment for defendant. On summary judgment in FOIA litigation, affidavits submitted by an agency are “accorded a presumption of good faith.” 33 Plaintiffs’ FOIA requests concerned communications and agreements between FirstNet and various third parties (save for their fifth request concerning the Portal’s terms of use, in response to which the NTIA 30 MacLeod, 2017 WL 4220398, at 11 (alterations omitted) (quoting Reyes, 991 F. Supp. 2d at 27). 31 Amnesty Int’l USA, 2008 WL 2519908, at 11. 32 App’x 221. 33 Grand Cent. P’ship, 166 F.3d at 489 (internal quotation marks and citations omitted). 13 No. 18-2819 produced five responsive records). 34 The agency declarations explained that FirstNet is an independent entity that, with few exceptions not relevant here, may act without the approval of—and without even consulting—the NTIA or the DOC. 35 The declarations detail specifically why the agency employees reasonably determined that a search for responsive records would be futile. For example, in response to the request for copies of all user comments submitted to FirstNet, Kathy Smith, NTIA’s Chief Counsel and FOIA Officer, explained that “NTIA personnel did not have regular access to the FirstNet State Plan Portal.” 36 Similarly, in response to the request for copies of all contracts with AT&T pertaining to FirstNet, Smith stated that NTIA “is not a party to the contract between FirstNet and AT&T.” 37 And Michael J. Toland, DOC’s Deputy Chief FOIA Officer, explained that it would be futile to search for responsive documents related to requests about FirstNet because “DOC does not have access to the FirstNet State Plan portal; DOC does not maintain copies of FirstNet’s contracts, agreements, memoranda of understanding, and similar documents; and there is no reason to believe that DOC would have copies of communications from state government officials to 34 Plaintiffs requested “copies of all user comments submitted to the FirstNet State Plan Portals” (Request 1), App’x 67; “all communications from any state government officials to [FirstNet], which the agency considers to be agreements (or proposed agreements) to ‘opt-in’ to the FirstNet system” (Request 2), App’x 69; “all contracts, agreements, memoranda of understanding, etc., with AT&T pertaining to [FirstNet]” (Request 3), App’x 72; “copies of all [FirstNet] plans (and associated correspondence, such as notification letters) made available to U.S. governors” during the specified time period (Request 4), App’x 78; terms of use for the Portal and associated documents (Request 5), App’x 83; and “all correspondence sent by states or territories to FirstNet affirmatively opting out of the FirstNet system” (Request 6), App’x 88. 35 See 47 U.S.C. § 1424(a) (establishing FirstNet as an “independent authority within the NTIA”). 36 App’x 93. 37 Id. 14 No. 18-2819 FirstNet with an election to ‘opt in’ to the FirstNet system.” 38 These details adequately explain why defendant would not have records responsive to those requests: the records sought concerned an independent entity’s external communications, in which defendant was not required to be involved. Plaintiffs have submitted no evidence to rebut the presumption of good faith accorded to the declarations. Instead, they argue unsuccessfully that the declarations themselves are insufficient to quell a genuine dispute that the agency’s response was adequate. Accordingly, we affirm the district court’s determination that there was no genuine dispute of material fact as to the futility of a search by the agency for responsive records. C. Plaintiffs’ remaining claims. Plaintiffs next challenge the district court’s determination that the agency declarations establish beyond genuine dispute that the NTIA and the DOC did not have a practice or policy of referring FOIA requests to FirstNet, in violation of FOIA (Count 17). This challenge is meritless. Plaintiffs concede that “there would be no harm” if the agency were to conduct a search before referring the requests to FirstNet, arguing instead that “[t]he harm comes when DOC components refer requests to FirstNet without performing a search.” 39 As we have discussed, however, an agency may decline to perform a search if it reasonably determines that a search will be futile, as was the case here. Moreover, the agency declarations explained that the agencies do not have a “policy of automatically referring to FirstNet all FOIA 38 Id. at 123. 39 Plaintiffs-Appellants Br. at 34 (emphasis in original). 15 No. 18-2819 requests for records involving FirstNet.” 40 Instead, each agency makes a “case-by-case determination whether it is likely to have responsive records,” and “[w]hen [it] determines that it might have responsive records, it conducts a search.” 41 This explanation is consistent with the fact that the NTIA produced five records responsive to plaintiffs’ fifth FOIA request. Plaintiffs have not provided any evidence to rebut the presumption of good faith accorded to the declarations. We therefore affirm the district court’s grant of summary judgment for defendant on Count 17. Finally, plaintiffs allege that defendant violated § 208 of the E-Government Act of 2002 42 by failing to conduct a privacy impact assessment regarding personal information gathered via FirstNet (Count 18). 43 Plaintiffs affirmatively waived this claim as it relates to the Portal, so we consider it only as it pertains to the NPSBN and any related systems. 44 We agree with the district court that “claims about the privacy of any personal information that might be collected by future FirstNet systems when they do come into existence are not yet ripe for judicial review.” 45 And as the district court concluded, there 40 App’x 124 (Toland Decl. ¶ 21); see also App’x 94 (Smith Decl. ¶ 20) (“NTIA does not have a policy of automatically referring all FOIA requests for records about FirstNet to FirstNet.”). 41 Id. at 94–95 (Smith Decl. ¶ 20). 42 44 U.S.C. § 3501 note. 43 The parties do not dispute that defendant has conducted only one privacy impact assessment, for the NTIA-035 FirstNet General Support System. That assessment was available on the DOC’s public website. See App’x 238. 44 Plaintiffs-Appellants Br. at 35 (stating that plaintiffs “no longer have any interest in the Portal” and that their argument on appeal concerns only defendant’s alleged “failure to issue a [privacy impact assessment] for the NPSBN and any related systems”). 45 App’x 223. The district court first addressed ripeness in its opinion dated December 20, 2017, concluding that the claim was not ripe because the NPSBN was not yet operational. Id. (“[T]o the extent that Count 18 seeks relief for the lack of privacy impact assessments for systems not yet in existence, such a claim is not 16 No. 18-2819 is no genuine dispute as to whether the NPSBN is operational: it is not. 46 Plaintiffs therefore cannot have been harmed by the absence of a § 208 privacy assessment. Specifically, we reject plaintiffs’ assertion that the district court abused its discretion in denying their motion to strike the declaration of Paul Madison, Chief Counsel for the FirstNet Authority, which defendant submitted along with its supplemental briefing on Count 18 to show that the NPSBN was not yet operational. 47 The media sources plaintiffs identified to show that the NPSBN was operational refer not to the NPSBN but rather to other services provided by AT&T that are marketed under the FirstNet brand. Such mismatched evidence is insufficient to rebut the presumption of good faith accorded to Madison’s statement that the NPSBN is not yet operational. 48 Lastly, the parties spill much ink over whether plaintiffs have statutory standing to bring a claim under § 208. We do not reach this question. Having concluded that plaintiffs’ claim is not ripe for review, we do not have subject matter jurisdiction to address whether ripe for judicial review.”). In supplemental briefing on the § 208 claim as it related to the Portal, the parties raised additional facts regarding whether the NPSBN was yet operational: plaintiffs cited to various media stories to show that the NPSBN was operational, and the DOC submitted an additional declaration from Paul Madison, Chief Counsel for the FirstNet Authority, to show that it was not. See id. at 238–39. The district court concluded that “the Madison declaration establishe[d] beyond genuine dispute that the NPSBN remains nonoperational” and that “[t]o the extent that the Section 208 claim relates to the NPSBN, it remains unripe for review.” Id. at 240. 46 See id. at 223, 238–40. 47 Id. at 227 (Madison Decl. ¶ 4), 240; see Boyce v. Soundview Tech. Grp., Inc., 464 F.3d 376, 385 (2d Cir. 2006) (employing the abuse-of-discretion standard to review a district court’s evidentiary ruling). 48 See Grand Cent. P’ship, Inc., 166 F.3d at 489 (stating that agency affidavits are “accorded a presumption of good faith” in FOIA litigation). 17 No. 18-2819 plaintiffs fall within the zone of interests of § 208 and, therefore, whether they have a cause of action under that provision. 49 CONCLUSION For the reasons discussed above, we AFFIRM the judgment of the district court. 49See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 127–28 (2014) (concluding that the zone-of-interests analysis is a question of statutory interpretation that “requires us to determine the meaning of the congressionally enacted provision creating a cause of action”); Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998) (“The requirement that jurisdiction be established as a threshold matter springs from the nature and limits of the judicial power of the United States and is inflexible and without exception.” (internal quotation marks and alterations omitted)).	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/4555665/	17-1558 Liberian Community Association v. Lamont UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2017 (Argued: February 8, 2018 Decided: August 14, 2020) No. 17-1558 –––––––––––––––––––––––––––––––––––– LIBERIAN COMMUNITY ASSOCIATION OF CONNECTICUT, on behalf of themselves and those similarly situated, LOUISE MENSAH-SIEH, on behalf of herself and her minor children B.D. and S.N., on behalf of themselves and those similarly situated, VICTOR SIEH, on behalf of themselves and those similarly situated, EMMANUEL KAMARA, on behalf of themselves and those similarly situated, ASSUNTA NIMLEY-PHILLIPS, on behalf of themselves and those similarly situated, LAURA SKRIP, on behalf of themselves and those similarly situated, RYAN BOYKO, on behalf of themselves and those similarly situated, ESTHER YALARTAI, on behalf of themselves and those similarly situated, BISHOP HARMON YALARTAI, on behalf of themselves and those similarly situated, Plaintiffs-Appellants, -v.- NED LAMONT, Governor, DEIDRE S. GIFFORD, Acting Commissioner of Public Health, JEWEL MULLEN, Former Commissioner of Public Health, Defendants-Appellees. 1 1 The Clerk of Court is respectfully directed to amend the caption as set forth above. 1 –––––––––––––––––––––––––––––––––––– Before: WINTER, LIVINGSTON, and CHIN, Circuit Judges. Plaintiffs-Appellants Ryan Boyko, Laura Skrip, the Mensah-Sieh family, Assunta Nimley-Phillips, Bishop Harmon Yalartai, Esther Yalartai, and the Liberian Community Association of Connecticut (“Appellants”) appeal from a judgment of the United States District Court for the District of Connecticut (Covello, J.) denying their motion for class certification and dismissing their suit for lack of standing and based on qualified immunity. Appellants challenged the quarantine decisions of certain Connecticut state officials in response to an Ebola epidemic in West Africa. On appeal, they primarily argue that (1) they suffered actual or imminent injuries that create standing to seek prospective relief to avert allegedly unconstitutional future quarantines; (2) clearly established law required that any quarantine imposed be medically necessary and comport with certain procedural safeguards; and (3) their class is sufficiently numerous to merit certification. We conclude that (1) the district court properly deemed their injuries too speculative to support standing, and (2) the law surrounding quarantines was not clearly established such that a state official may be held liable for the actions taken here. We do not reach the class certification issue because it is mooted by our conclusion as to standing. Accordingly, the judgment of the district court is AFFIRMED and REMANDED with instructions to amend the judgment to clarify that the state law claims were dismissed without prejudice. Judge CHIN concurs in part and dissents in part in a separate opinion. FOR PLAINTIFFS-APPELLANTS: D’LANEY GIELOW (Michael J. Wishnie, Amy Kapczynski, Dana Bolger, Kyle Edwards, Megha Ram, on the briefs), Jerome N. Frank Legal Services Organization, Yale Law School, New Haven, CT. JEREMY ERSHOW (Susan J. Kohlmann, Jeremy M. Creelan, Irene M. Ten Cate, on the briefs), Jenner & Block LLP, New York, NY. 2 (Robert M. Palumbos, Duane Morris LLP, Philadelphia, PA, for George J. Annas, Jennifer Bard, Leo Beletsky, Micah Berman, Scott Burris, Erwin Chemerinsky, Linda C. Fentiman, Lance Gable, Brandon Garrett, Lawrence O. Gostin, Jonathan Hafetz, Helen Hershkoff, Peter D. Jacobson, Jonathan Kahn, Renee M. Landers, Sylvia A. Law, Jenny S. Martinez, Seema Mohapatra, Burt Neuborne, Wendy Parmet, Aziz Rana, Judith Resnik, Kermit Roosevelt, Charity Scott, and Stephen I. Vladeck, as amici curiae) (Kim E. Rinehart, Wiggin and Dana, LLP, New Haven, CT, for Yale New Haven Health Services Corporation, Hartford Hospital, The Hospital of Central Connecticut, Backus Hospitals, MidState Medical Center, Windham Hospital, Saint Francis Hospital and Medical Center, Johnson Memorial Hospital, Saint Mary’s Hospital, Bristol Hospital, and Western Connecticut Health Network, Inc., as amici curiae) (Dan Barrett, ACLU Foundation of Connecticut, Hartford, CT, and Esha Bhandari, American Civil Liberties Union Foundation, New York, NY, for American Civil Liberties Union, American Civil Liberties Union of Connecticut, Doctors Without Borders/ Medécins Sans Frontières USA as amici curiae) (Ann O’Leary and Kathleen Hartnett, Boies Schiller Flexner LLP, Palo Alto, CA, and 3 David A. Barrett and Yotam Barkai, Boies Schiller Flexner LLP, New York, NY, for Mark Barnes, Leana Wen, and Jeffrey Duchin as amici curiae) FOR DEFENDANTS-APPELLEES: ROBERT J. DEICHERT, Assistant Attorney General, for George Jepsen, Attorney General, Hartford, CT. DEBRA ANN LIVINGSTON, Circuit Judge: This case arises out of the Ebola epidemic that ravaged West Africa between 2014 and 2016. In response to the epidemic, then-Governor Dannel Malloy declared a public health emergency in the State of Connecticut. The declaration authorized Dr. Jewel Mullen, then-Commissioner of Public Health, to isolate or quarantine individuals whom she believed had been exposed to or could transmit the Ebola virus. She ordered twenty-one-day quarantines for two Ph.D. candidates—Ryan Boyko and Laura Skrip—and six members of the Mensah-Sieh family who had recently emigrated from Liberia. None of the quarantined individuals were infected with Ebola. Boyko, Skrip, the Mensah-Siehs, Assunta Nimley-Phillips, Bishop Harmon Yalartai, Esther Yalartai, and the Liberian Community Association of Connecticut (collectively, “Appellants”) filed a putative class-action suit in the United States District Court for the District of Connecticut (Covello, J.) challenging the state 4 officials’ actions. 2 They primarily alleged violations of their substantive and procedural due process rights and the Fourth Amendment. The defendants—the Governor and Commissioners of Public Health—moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b). As to these constitutional claims, the district court dismissed the claims for injunctive relief under Rule 12(b)(1), for lack of standing, and dismissed the claims for damages under Rule 12(b)(6), on the basis of Dr. Mullen’s assertion of qualified immunity. 3 The court also denied the motion for class certification. We agree with the conclusions reached by the district court as to standing and qualified immunity and need not reach the issue of class certification. Accordingly, we AFFIRM the judgment but REMAND with instructions to the district court that the judgment be amended to reflect that the state law claims were dismissed without prejudice. 2 Dr. Mary Jean O was also a plaintiff but moved before this Court on May 21, 2020, for an order dismissing this appeal as to her. We granted the motion on June 23, 2020. 3 As set forth herein, the plaintiffs also raised certain federal statutory claims that were similarly dismissed and that are not pursued on appeal. The district court declined to exercise supplemental jurisdiction as to additional claims raised under Connecticut state law, thus dismissing them without prejudice. See infra Background, Section II. 5 BACKGROUND I. Factual Background 4 A. The 2014 Ebola Outbreak Ebola “is spread through direct physical contact with the bodily fluids of a symptomatic person, the body of a person who has died from Ebola, or objects contaminated with the virus, such as used needles.” J.A. 26. 5 Once an individual has contracted the virus, “[t]he incubation period (the time from infection to onset of symptoms) is usually four to nine days but can range from two to twenty-one days.” Id. “Symptoms include fever, headache, joint and muscle aches, diarrhea, and vomiting.” Id. The first victim of the 2014 Ebola outbreak may well have been a young boy from a village “deep within the Guinean forest region” who died in December 2013. 6 The disease thereafter spread, “kill[ing] the boy’s mother, then his 3-year- old sister, then his grandmother.” 7 In the months that followed, dozens more The factual background presented here is primarily derived from allegations in 4 the complaint, which we accept as true in considering a motion to dismiss. 5 “J.A.” refers to the Joint Appendix. 6 Michelle Roberts, First Ebola boy likely infected by playing in bat tree, BBC (Dec. 30, 2014), https://www.bbc.com/news/health-30632453. Denise Grady and Sheri Fink, Tracing Ebola’s Breakout to an African 2-Year-Old, 7 N.Y. Times (Aug. 9, 2014), https://www.nytimes.com/2014/08/10/world/africa/tracing- 6 died as the disease moved between relatives, friends, and health care workers. Soon, the virus had “spread rapidly throughout Guinea, Liberia, and Sierra Leone.” J.A. 26. On March 23, 2014, “the World Health Organization (‘WHO’) announced an outbreak of Ebola in West Africa.” Id. Over the next twenty-two months, more than 28,000 individuals were diagnosed with Ebola. Over 11,000 died. This was the largest Ebola outbreak in history, yet those afflicted resided almost exclusively in Guinea, Liberia, and Sierra Leone. Outside those three countries, fewer than forty cases of Ebola emerged. During the outbreak, to prevent the spread of the disease in the United States, both the Centers for Disease Control and Prevention (“CDC”) and the Department of Homeland Security (“DHS”) released policy guidance on how to manage the flow of people from West Africa. The CDC initially “recommended only self-monitoring or active monitoring for twenty-one days, and recommended no movement restrictions or quarantine” “[f]or asymptomatic individuals returning from West Africa with ‘no risk’ or ‘low risk’ of exposure.” 8 J.A. 27. ebolas-breakout-to-an-african-2-year-old.html. 8 “According to the CDC, ‘isolation’ is the separation of individuals who are sick with a contagious disease from those who are not sick. ‘Quarantine’ is the separation of asymptomatic individuals exposed to a contagious disease to see if they become sick.” J.A. 28. “‘Self-monitoring’ refers to a practice whereby people check their own 7 On October 8, 2014, the CDC and the DHS jointly “announced a safety plan” pursuant to which individuals “entering the United States from Guinea, Liberia, and Sierra Leone” were directed “to one of five ports of entry.” J.A. 28. On arrival, trained staff screened travelers for signs of illness and inquired about their health and possible prior exposures. If a passenger “required further evaluation or monitoring, federal officers referred those travelers to the appropriate state or local public health authority. Travelers with no symptoms, fever, or a known history of exposure received health information for self-monitoring and were approved to exit the airport.” J.A. 28. After the safety plan was announced, the CDC also revised its prior guidance. The new guidance, issued on October 27, “recommended ‘no restrictions on travel, work, public conveyances, or congregate gatherings’ for asymptomatic individuals . . . who had been in an affected country but had no known exposure.” J.A. 30. Over a year and a half after the virus was first identified, the WHO declared Sierra Leone Ebola-free on November 7, 2015. Guinea and Liberia followed on December 29, 2015, and January 14, 2016, respectively. Despite these temperature and monitor themselves for symptoms. ‘Active monitoring’ refers to the ‘monitoring of travelers by health departments.’” Appellants Br. 7 n.2. 8 declarations, experts cautioned that these three nations “remain[ed] at high risk of future Ebola outbreaks.” Id. Nevertheless, on March 29, 2016, the WHO deemed the “Public Health Emergency of International Concern” over. J.A. 111. Since the end of the Ebola crisis in West Africa, there have been at least ten flare- ups or small outbreaks of Ebola in West Africa, and multiple outbreaks in the Democratic Republic of the Congo. B. Connecticut’s Response Under Connecticut state law, the state government acquires the authority to quarantine if the Governor declares a public health emergency. Conn. Gen. Stat. § 19a-131a. Once the Governor makes such a declaration, he may authorize the State Public Health Commissioner (the “Commissioner”) to quarantine or isolate people “whom the commissioner has reasonable grounds to believe” are or could be infected with a communicable disease. Id. § 19a-131b(a). The Commissioner is to issue quarantine and isolation orders only when they are “necessary and the least restrictive alternative to protect or preserve the public health.” Id. Numerous statutory factors guide the issuance of a quarantine or isolation order. Id. § 19a-131b(b). The Commissioner must also comply with various procedural requirements, including informing the quarantined or isolated individuals in 9 writing, id. § 19a-131b(c), limiting the order to a renewable twenty-day period, id., and informing individuals that they have a right to a hearing to challenge their quarantine order and a right to an attorney at this hearing at the State’s expense, id. § 19a-131b(d). Turning to the actions of the Governor of Connecticut (“Governor”) 9 and then-Commissioner of the Connecticut Department of Public Health Dr. Jewel Mullen (collectively with Acting Commissioner Deidre S. Gifford, “Appellees”), on October 7, 2014, the Governor issued an order declaring a public health emergency for the State of Connecticut. The order authorized Dr. Mullen “to direct the isolation or quarantine of individuals whom she ‘reasonably believe[d] to have been exposed to, infected with, or otherwise at risk of passing the Ebola virus.’” J.A. 28. The following week, on October 16, 2014, “Malloy and Mullen established statewide Ebola response policies . . . that the Governor’s office described as ‘more stringent than the guidelines thus far issued by the Federal Center[s] for Disease 9 The Governor at the time of the events underlying this suit and when the complaint was filed was Dannel Malloy. He has since been succeeded by Ned Lamont. Accordingly, Governor Lamont has been automatically substituted as a defendant- appellee. See Fed. R. App. P. 43(c)(2). 10 Control and Prevention . . . .’ All asymptomatic individuals who had traveled to affected areas or been in contact with an infected individual were to be quarantined at home for twenty-one days.” J.A. 28–29. Appellants allege that the Governor and Dr. Mullen knew that their policy went further than was necessary, citing a statement from a Connecticut Department of Public Health spokesman describing people quarantined as “not sick and not a risk to public health.” J.A. 29, 71. The policy was ultimately modified and made less restrictive on October 27, the same day the CDC issued the revised guidance discussed above. The new plan “imposed ‘mandatory active monitoring’ for asymptomatic travelers arriving in Connecticut from Guinea, Liberia, and Sierra Leone, but still contemplated ‘quarantine for individuals based on risk factors’” following an “individualized risk assessment.” J.A. 29–30. The revised policy remained in place until April 1, 2016, when, three days after the WHO declared an end to the public health emergency in West Africa, Governor Malloy terminated the emergency in Connecticut. 11 C. Appellants’ Experiences 1. The Ph.D. Candidates Ryan Boyko and Laura Skrip were Ph.D. candidates at the Yale School of Public Health who traveled to Liberia to help the Liberian Ministry of Health and Social Welfare analyze data collected during the Ebola outbreak. After arriving in Liberia on September 18, 2014, they did not have contact with any Ebola- symptomatic people and took a variety of precautions to avoid exposure. They planned to return to the United States on October 3 but delayed their trip when Boyko developed a cough. Skrip displayed no symptoms, and Boyko felt better after two days. As a condition of returning on a replacement flight, Yale’s travel medical insurance company required that Boyko be tested for Ebola. On October 6, he tested negative and received a letter confirming this. When they learned that a freelance cameraman who spent time at their hotel had developed Ebola symptoms, Boyko and Skrip consulted with CDC representatives, who told them that this presented “no risk” because the cameraman did not display symptoms until after they had last seen him. J.A. 33. Boyko and Skrip left Liberia on October 11 and, upon arriving back in the United States, underwent Ebola screening procedures. DHS officials allowed 12 them to enter the country. Federal officials informed Connecticut officials about Boyko and Skrip’s arrival. The pair returned to New Haven, where they took their temperatures twice a day and emailed the results to the Yale Health Center. On October 15, Boyko developed a fever and was transported to the Yale- New Haven Hospital. Hospital staff took blood samples and sent them to the CDC and the Massachusetts Public Health laboratory for testing. Boyko’s fever subsided while he was under the hospital’s care and both tests came back negative for Ebola. Contemporaneously, the City of New Haven health department told Skrip that she would be subject to “mandatory active monitoring,” meaning that the City would call her twice a day to ask her to take her temperature and report the results. J.A. 34. On October 17, the same day Boyko received his second negative result, Dr. Mullen ordered him quarantined. The order required him to stay in his home through October 30, twenty-one days after October 10, i.e., the longest possible incubation period for Ebola. The order informed Boyko that failure to comply could lead to penalties but acknowledged that Boyko had a right to a counseled hearing. Dr. Mullen signed an equivalent order for Skrip. Boyko received a copy of his quarantine order in the hospital, but Skrip was informed of hers over 13 the phone. After she informed a Yale official that she had not received an official quarantine order, Skrip received a written order laying out the terms of the quarantine and her rights. Police officers were deployed outside of Boyko and Skrip’s apartments to ensure they complied with the quarantine orders. Their quarantines ended at 12:01 a.m. on October 30, 2014, a day earlier than initially anticipated because of state law requirements. See Conn. Gen. Stat. § 19a-131b(c) (only allowing for quarantine orders of twenty days unless the Commissioner of Public Health renews the order). Despite the revision to Connecticut’s quarantine policy on October 27, neither Boyko’s nor Skrip’s quarantine order was reevaluated before the quarantines ended in due course. 2. The Mensah-Sieh Family and Assunta Nimley-Phillips Assunta Nimley-Phillips, who is Louise Mensah-Sieh’s sister, immigrated to the United States from Liberia in the 1980s. Mensah-Sieh, her husband Nathaniel Sieh, 10 and their four children—Victor Sieh, Emmanuel Kamara, B.D., and S.N.—lived in Liberia. After receiving visas to live in the United States through the Diversity Visa Lottery, the entire family underwent medical tests on 10 Nathaniel Sieh did not appeal the district court’s order of dismissal. 14 the basis of which federal officials approved them for entry into the United States. They arrived on October 18, 2014, at which point the family was screened by DHS personnel and cleared to enter the country. The Mensah-Siehs were neither told to self-monitor nor provided any other quarantine-related information. Nimley- Phillips met her family at the airport and drove them to her home in West Haven, Connecticut. CDC and DHS officials notified Connecticut state and local health officials of the family’s arrival. On October 20, 2014, Maureen Lillis, West Haven Director of Public Health, called Nimley-Phillips and told her that the Mensah-Siehs were subject to a quarantine for twenty-one days. Lillis told Nimley-Phillips to check the family’s temperature three times a day and monitor them for symptoms. As with Boyko and Skrip, police officers were stationed outside Nimley-Phillips’s home and barred anyone from entering or exiting the house apart from Nimley-Phillips and her adult daughter. Neither Nimley-Phillips nor the Mensah-Sieh family received a written quarantine order, official communications about the quarantine, or information regarding their right to challenge the quarantine. No adjustments were made to the Mensah-Siehs’ quarantine orders following the October 27 revision to Connecticut’s quarantine policy. 15 3. The Yalartais and the Liberian Community Association of Connecticut The other Appellants—Bishop Harmon Yalartai, Esther Yalartai, and the Liberian Community Association of Connecticut (“LCAC”)—all allege that they intend to travel to Liberia and fear being subject to quarantine orders upon their return. Indeed, three of the Appellants—the Yalartais and Skrip—were in Liberia when the complaint was filed. The Yalartais, who were born in Liberia but reside in Connecticut, are leaders of a religious organization with churches in both Liberia and Connecticut. They regularly travel to and from Liberia to oversee the work of their church. LCAC is a non-profit organization that works to enhance the lot of the Liberian community in Connecticut and contribute to development efforts in Liberia. Dozens of its 230 members regularly travel to Liberia. II. Procedural History Appellants filed their putative class action suit on February 8, 2016. All Appellants sought declaratory and injunctive relief; Boyko and the Mensah-Siehs also sought damages from Dr. Mullen. Appellants allege that Appellees, inter alia, (1) violated the substantive due process rights of Boyko, Skrip and the Mensah-Siehs by “quarantining them without medical or epidemiological justification and in a manner that substantially exceeded the least restrictive means 16 necessary”; (2) violated their procedural due process rights by failing to make individualized assessments or providing adequate notice and an opportunity to challenge their quarantines; and (3) violated the Fourth Amendment by unreasonably seizing them through the quarantines. 11 J.A. 58–62. They also asserted various state law tort claims, and moved to certify a “class consisting of all persons who will or intend to travel from Ebola-affected countries to Connecticut and are at risk of Defendants subjecting them to an unlawful and scientifically unjustified quarantine.” J.A. 54. Appellees filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and failure to state a claim under Rule 12(b)(6), and they opposed the motion for class certification. The district court denied the motion for class certification, “concluding that the proposed class is too speculative to satisfy the numerosity requirement for class certification.” Liberian Cmty. Ass’n v. Malloy, No. 3:16-cv-201, 2016 WL 10314574, at 7 (D. Conn. Aug. 1, 2016). In a separate decision, the district court granted Appellees’ motion to dismiss. Liberian Cmty. Ass’n v. Malloy, No. 3:16-cv- 11Before the district court, Appellants also asserted claims under the Americans with Disabilities Act, 42 U.S.C. § 12132, and the Rehabilitation Act, 29 U.S.C. § 794, which they do not press on appeal and we need not address. 17 201, 2017 WL 4897048, at 1 (D. Conn. Mar. 30, 2017). As to the claims for declaratory and injunctive relief, the district court found that Appellants lacked standing because they failed to establish “a ‘real and immediate’ threat of injury.” Id. at 7–8 (quoting Shain v. Ellison, 356 F.3d 211, 215 (2d Cir. 2004)). The district court further concluded that Dr. Mullen was entitled to qualified immunity on the damages claim. Id. at 9–14. Finally, as to the state law claims, the district court “decline[d] to exercise supplemental jurisdiction over the plaintiffs’ state law causes of action,” id. at 15, necessarily dismissing them without prejudice. See Carter v. HealthPort Techs., LLC, 82 F.3d 47, 54–55 (2d Cir. 2016); see also Carnegie- Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988) (“[W]hen the federal-law claims have dropped out of the lawsuit in its early stages and only state-law claims remain, the federal court should decline the exercise of jurisdiction by dismissing the case without prejudice.” (footnote omitted)). Accordingly, the district court entered judgment dismissing the action, although the judgment did not specify that the state claims were dismissed without prejudice. 12 This appeal followed. 12 In light of our decision to affirm the dismissal of the federal claims, we do not address the merits of the state law claims. However, we remand as to these claims, with instructions to the district court that it amend the judgment to make clear that these claims are dismissed without prejudice. 18 DISCUSSION Appellants advance two principal arguments on appeal: first, that they have standing to seek prospective relief, and, second, that Dr. Mullen is not entitled to qualified immunity on Boyko and the Mensah-Siehs’ damages claim. We disagree as to both arguments and discern no error in the district court’s standing or qualified immunity analysis. I “Standing to sue is a doctrine” that “limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). “[T]he ‘irreducible constitutional minimum’ of standing consists of three elements.” Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Id.; see also Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000). As relevant here, the “injury in fact” must have been “concrete and particularized” as well as “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (quotation marks and citations omitted). 19 “Allegations of possible future injury do not satisfy the requirements of Art[icle] III.” Whitmore v. Arkansas, 495 U.S. 149, 158 (1990). Rather, there must be “a ‘substantial risk’ that harm will occur.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 414 n.5 (2013) (quoting Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 153– 54 (2010)); see also Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158 (2014). “[T]he proper procedural route [for bringing a standing challenge] is a motion under Rule 12(b)(1).” All. for Envtl. Renewal, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 88 n.6 (2d Cir. 2006). And on appeal from a dismissal under Rule 12(b)(1), as here, “we review the court's factual findings for clear error and its legal conclusions de novo.” Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L., 790 F.3d 411, 417 (2d Cir. 2015). “The plaintiff[s] bear[] the burden of ‘alleg[ing] facts that affirmatively and plausibly suggest that [they] ha[ve] standing to sue.’” Id. (quoting Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011)). All allegations made in the complaint are accepted as true and construed in favor of the plaintiffs. Id. (citing W.R. Huff Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 106 (2d Cir. 2008)). Appellants failed to plead a sufficient likelihood that, under the revised policy, any of them faces a substantial risk of suffering a future injury. See City of 20 Los Angeles v. Lyons, 461 U.S. 95, 106–07 (1983). Indeed, the revised policy—that is, the policy that was in effect when the complaint was filed—defaults to active monitoring for any arriving asymptomatic travelers and permits quarantine only after an individualized assessment. In Lyons, the Supreme Court directed the dismissal of Lyons’ complaint challenging the use of chokeholds by Los Angeles police because the complaint “did not indicate why Lyons might be realistically threatened by police officers who acted within the strictures of the City’s policy.” Id. at 106. Here, as in Lyons, Appellants have failed plausibly to allege any basis for concluding that they will be threatened with quarantine by Connecticut state officials who act within the revised policy. Appellants argue that Appellees’ failure to reassess the quarantines imposed on Boyko, Skrip, and the Mensah-Siehs in light of the revised policy demonstrates its “irrational execution,” supposedly enhancing their risk of future injury. Appellants Br. 54. But the fact that Appellees declined to reconsider a previously imposed quarantine offers scant if any basis for assessing the substantiality of the prospective risk. Particularly in light of the individualized assessment mandated by the revised policy, Appellants “can only speculate as to whether [Appellees] will authorize such [quarantines]” in the future. Clapper, 21 568 U.S. at 413. And under the circumstances alleged in this complaint, “[w]e decline to abandon our usual reluctance to endorse standing theories that rest on speculation about the decisions of independent actors.” Id. at 414. In a final effort to overcome the deficiencies in the complaint, Appellants assert that they also suffer a “present harm” because the quarantine policy “that was firmly in place at the time of filing and had already been applied against several of them” “restricted [their] freedom by greatly increasing the potential monetary, time, and personal costs of traveling to Liberia.” Appellants Br. 56–57 (emphasis omitted). But this argument of present harm is contrary to the complaint’s own allegations. As already noted (and as the complaint alleges), the policy that was applied to quarantine Boyko, Skrip and the Mensah-Siehs was revised shortly after their quarantines were imposed. Appellants do not allege that they—or anyone else—have been subjected to a quarantine since the revised policy issued. Such circumstances thus distinguish Appellants from the plaintiffs in Monsanto, 561 U.S. at 153–55, and Friends of the Earth, 528 U.S. at 184– 85, upon which they rely. The plaintiffs in those cases averred that they would have to take immediate and concrete steps to avoid harm. See Monsanto, 561 U.S. at 154 (“[R]espondents would have to conduct testing to find out whether and to 22 what extent their crops have been contaminated.”); Friends of the Earth, 528 U.S. at 184 (“[A] company's continuous and pervasive illegal discharges of pollutants into a river would cause nearby residents to curtail their recreational use of that waterway and would subject them to other economic and aesthetic harms.”). Conversely here, Appellants merely allege that they must make travel plans “under the reasonable fear of being subject to another unjustified and unlawful quarantine.” 13 J.A. 49. In sum, the notion that Appellants must undertake reasonable efforts in the present to avert injury in the future is also speculative, and Appellants lack standing to pursue any of their prospective claims. 14 13 Indeed, Skrip and the Yalartais—the only Appellants who specifically allege that they intend to visit Liberia in the future—allege no changes to their travel plans at all, let alone that they either have incurred or will incur concrete costs because of their fear of the challenged policy. 14 Because we conclude that none of the named plaintiffs has standing to pursue their claims for prospective relief, the class proposed by Appellants necessarily fails as well. See Amador v. Andrews, 655 F.3d 89, 99 (2d Cir. 2011) (“[A] class action cannot be sustained without a named plaintiff who has standing.”); see also NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 159 (2d Cir. 2012) (“[W]e have said that, to establish Article III standing in a class action[,] for every named defendant there must be at least one named plaintiff who can assert a claim directly against that defendant, and at that point standing is satisfied and only then will the inquiry shift to a class action analysis.” (brackets, ellipsis, and quotation marks omitted)). Accordingly, we do not reach the class certification question. 23 II We now turn to the claim for damages against Dr. Mullen. “To survive a 12(b)(6) motion to dismiss, a ‘complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” Drimal v. Tai, 786 F.3d 219, 223 (2d Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Here, Appellees asserted a qualified immunity defense in their Rule 12(b)(6) motion to dismiss. We review a district court's determination as to qualified immunity on a motion to dismiss de novo, “‘accepting as true the material facts alleged in the complaint and drawing all reasonable inferences in plaintiffs’ favor.’” Garcia v. Does, 779 F.3d 84, 91 (2d Cir. 2015) (quoting Johnson v. Newburgh Enlarged Sch. Dist., 239 F.3d 246, 250 (2d Cir. 2001)). The Supreme Court has “repeatedly ‘stressed the importance of resolving immunity questions at the earliest possible stage [of the] litigation,’” Wood v. Moss, 572 U.S. 744, 755 n.4 (2014) (quoting Hunter v. Bryant, 502 U.S. 224, 227 (1991) (per curiam)), and it is “well established that an affirmative defense of official immunity . . . may be resolved by Rule 12(b)(6) if clearly established by the 24 allegations within the complaint,“ Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir. 1998); see also McKenna v. Wright, 386 F.3d 432, 435 (2d Cir. 2004) (noting that qualified immunity defense may be “successfully asserted in a Rule 12(b)(6) motion”). At the start, qualified immunity doctrine “is intended to provide government officials with the ability to ‘reasonably . . . anticipate when their conduct may give rise to liability for damages.’” Anderson v. Creighton, 483 U.S. 635, 646 (1987) (quoting Davis v. Scherer, 468 U.S. 183, 195 (1984)). When the “general rule of qualified immunity” is applicable, “officials can know that they will not be held personally liable as long as their actions are reasonable in light of current American law.” Id. Public officials are entitled to qualified immunity “unless (1) they violated a federal statutory or constitutional right, and (2) the unlawfulness of their conduct was ‘clearly established at the time.’” District of Columbia v. Wesby, 138 S. Ct. 577, 589 (2018) (quoting Reichle v. Howards, 566 U.S. 658, 664 (2012)). And a court need not determine whether a defendant violated a plaintiff’s rights if it decides that the right was not clearly established. See Pearson v. Callahan, 555 U.S. 223, 236 (2009). 25 To be sure, “a case directly on point” is not required “for a right to be clearly established.” White v. Pauly, 137 S. Ct. 548, 551 (2017) (per curiam). At the same time, “existing precedent must have placed the statutory or constitutional question beyond debate.” Id. (emphasis added). “‘Clearly established’ means that, at the time of the officer’s conduct, the law was sufficiently clear that every ‘reasonable official would understand that what he is doing’ is unlawful.” Wesby, 138 S. Ct. at 589 (quoting Ashcroft v. al-Kidd, 563 U.S. 731, 741 (2011)). In practice, this means that “‘controlling authority’ or ‘a robust consensus of cases of persuasive authority’” dictate the action at issue. Id. at 589–90 (quoting al-Kidd, 563 U.S. at 741–42). A plaintiff must show with a high “degree of specificity,” Mullenix v. Luna, 136 S. Ct. 305, 309 (2015) (per curiam), that the rule he seeks to apply prohibited the officer’s conduct. See Wesby, 138 S. Ct. at 590; see also City and County of San Francisco v. Sheehan, 135 S. Ct. 1765, 1775–76 (2015) (noting that the Supreme Court has “repeatedly told courts . . . not to define clearly established law at a high level of generality”). In other words, an official is immune from liability unless, under the particular circumstances the official faced, any “reasonable offic[ial]” would have “known for certain that the conduct was 26 unlawful” under then-existing precedent. Ziglar v. Abbasi, 137 S. Ct. 1843, 1867 (2017). Boyko and the Mensah-Siehs—the only Appellants seeking damages— advance three legal bases for their claim: substantive due process, procedural due process, and the Fourth Amendment’s prohibition on unreasonable seizures. We discuss only whether, at the time of Dr. Mullen’s alleged conduct, it was clearly established that her conduct ran afoul of these constitutional protections. 15 A. Substantive Due Process Appellants first argue that “[b]ecause quarantines—a form of civil detention—implicate fundamental liberty interests, existing law clearly establishes that officials may impose them only when necessary to achieve a 15 Appellants urge us to “address the merits of the constitutional issue even if the Court were to conclude that Dr. Mullen’s conduct is shielded by qualified immunity.” Appellants Br. 48. Yet the Supreme Court has cautioned us to “think hard, and then think hard again, before turning small cases into large ones.” Camreta v. Greene, 563 U.S. 692, 707 (2011); see also al-Kidd, 563 U.S. at 735 (“Courts should think carefully before expending ‘scarce judicial resources’ to resolve difficult and novel questions of constitutional or statutory interpretation that will ‘have no effect on the outcome of the case.’” (quoting Pearson, 555 U.S. at 236–37)). While there are circumstances in which discretion is properly exercised to address step one of the qualified immunity analysis even when qualified immunity is appropriate at step two, this is not such a situation. See, e.g., Jones v. Chandrasuwan, 820 F.3d 685, 691–92 (4th Cir. 2016); Morgan v. Swanson, 659 F.3d 359, 385 (5th Cir. 2011); cf. Pearson, 555 U.S. at 237–39 (cataloguing situations where reaching the constitutional question is inappropriate). 27 compelling state interest and in the absence of less restrictive means.” Appellants Br. 30 (citing Lawrence v. Texas, 539 U.S. 558, 593 (2003); Shelton v. Tucker, 364 U.S. 479, 488 (1960)). According to Appellants, “[c]ases in multiple civil commitment settings confirm that substantive due process analysis applies whenever, as with quarantine, a state civilly confines an individual ostensibly to protect the public.” Appellants Br. 31 (citing cases). And Appellants cite Second Circuit precedent to the effect that “involuntary confinement of an individual for any reason”—which, according to Appellants, includes the quarantining of individuals amidst an infectious disease outbreak—is subject to a least-restrictive-means test. Appellants Br. 33 (quoting Project Release v. Prevost, 722 F.2d 960, 971 (2d Cir. 1983)) (emphasis in Appellants Br.). But Appellants take this Court’s language out of context. The full quotation from Project Release makes clear that its “for any reason” language refers specifically to various public policy justifications a state might have to commit the mentally ill, such as its “parens patriae” or “police power” authority. See Project Release, 722 F.2d at 971. Read in context, it is clear that the Court, in articulating a least-restrictive-means test, was referring only to the civil detention of people who are mentally ill. Indeed, every case relied upon by Project Release in 28 discussing due process solely addresses confinement of the mentally ill—not, as Appellants contend, multiple settings. See, e.g., Vitek v. Jones, 445 U.S. 480 (1980); Addington v. Texas, 441 U.S. 418 (1979); O’Connor v. Donaldson, 422 U.S. 563 (1975); Humphrey v. Cady, 405 U.S. 504 (1972); see also Foucha v. Louisiana, 504 U.S. 71, 80 (1992); Jones v. United States, 463 U.S. 354 (1983); Francis S. v. Stone, 221 F.3d 100, 111 (2d Cir. 2000). A “reasonable official” would thus not necessarily interpret Project Release or any of these other cases to define the outer limits of the state’s quarantine power in the context of a major Ebola outbreak. 16 Wesby, 138 S. Ct. at 590. The dissent similarly finds support for a least-restrictive-means test in the context of an Ebola-related quarantine in the Supreme Court’s affirmation in Jones v. United States that “‘commitment for any purpose constitutes a significant deprivation of liberty that requires due process protection.’” Dissenting Op. 3–4 (quoting Jones, 463 U.S. at 361) (emphasis in dissent). Again, however, the due 16 Jolly v. Coughlin, 76 F.3d 468, 479–80 (2d Cir. 1996), upon which Judge Chin’s partial dissent (“dissent”) relies, is similarly unhelpful in establishing the substantive due process standard urged by Appellants. Indeed, Jolly does not even address a due process claim. The “medical keeplock” at issue there was challenged under the Religious Freedom Restoration Act, which by its terms applies a least-restrictive-means test only to claims regarding the exercise of religion. See id. at 474. 29 process standards articulated in Jones, as in Project Release, concern civil commitment of the mentally ill. Taking a generalized statement like that found in Project Release or Jones as evidence of a “clearly established rule” in the context of quarantines conflicts with the Supreme Court’s directive that we should not “define clearly established law at a high level of generality.” Mullenix, 136 S. Ct. at 308; see id. (“This inquiry ‘must be undertaken in light of the specific context of the case, not as a broad general proposition.’” (quoting Brosseau v. Haugen, 543 U.S. 194, 198 (2004) (per curiam)). Quarantines against infectious disease, involving different public safety concerns and implicating different liberty interests, are simply not sufficiently analogous to civil commitment of the mentally ill to clearly establish applicable due process constraints. As the Supreme Court explained in City of Sacramento v. Lewis, “[r]ules of due process are not . . . subject to mechanical application in unfamiliar territory.” 523 U.S. 833, 850 (1998); cf. Reno v. Flores, 507 U.S. 292, 302 (1993) (“‘Substantive due process’ analysis must begin with a careful description of the asserted right, for ‘the doctrine of judicial self-restraint requires us to exercise the utmost care whenever we are asked to break new ground in this field.’” (quoting Collins v. Harker Heights, 503 U.S. 115, 125 (1992)) (brackets omitted)). Accordingly, not “every reasonable official would interpret [civil 30 commitment cases] to establish the particular rule that the plaintiff[s] seek[] to apply.” Wesby, 138 S. Ct. at 590. Indeed, Appellants point to only one decision that has applied the civil commitment line of cases in the infectious disease context: Best v. St. Vincents Hosp., No. 03 CV.0365, 2003 WL 21518829 (S.D.N.Y. July 2, 2003), adopted by 2003 WL 21767656, aff’d in relevant part sub nom. Best v. Bellevue Hosp., 115 F. App’x 459 (2d Cir. 2004). But a single magistrate’s report and recommendation, even when adopted by a district court, is insufficient, standing alone, to clearly establish a constitutional rule. 17 Cf. Matusick v. Erie Cty. Water Auth., 757 F.3d 31, 61 (2d Cir. 2014) (“[W]e have specifically cautioned against the reliance on non-precedential summary orders [and district court opinions] in ‘clearly established’ analyses” because “‘[n]on-precedential’ decisions, by their very definition, do not make law.” (citing Jackler v. Byrne, 658 F.3d 225, 244 (2d Cir. 2011))). Nor does it help to situate Best among other decisions addressing quarantines and infectious diseases. By the late nineteenth century, “the right of the legislature to enact such measures as will protect all persons from the We did not have occasion to pass on the merits of the magistrate judge’s analysis 17 in summarily affirming in part the judgment on appeal. 31 impending calamity of a pestilence” was well established. In re Smith, 146 N.Y. 68, 77 (1895). As the doctrine developed into the early twentieth century, courts gradually recognized limits on this power. Even so, neither Appellants nor the dissent point to any authority in this archipelago of cases that clearly establishes the substantive due process rule they now urge. 18 Quite to the contrary. In assessing the constitutionality of a Massachusetts law requiring individuals to either receive the smallpox vaccine or pay a fine, the Supreme Court noted in 1905 that “the police power of a state must be held to embrace, at least, such reasonable regulations established directly by legislative 18 For instance, in Chy Lung v. Freeman, the Supreme Court considered a California statute which allowed the State to exclude arriving passengers on a number of grounds, including if they were “a public charge, or likely soon to become so” because of “sickness or disease.” 92 U.S. 275, 277 (1875). But far from articulating substantive due process limits on the quarantine authority, the Court ultimately struck down the statute because it conflicted with the federal government’s authority to regulate immigration. Id. at 281. In Smith, the New York Court of Appeals ruled unlawful the quarantine of individuals who had been detained for refusing to receive a smallpox vaccine. 146 N.Y. at 78. But it in no way articulated a least-restrictive-means test of the sort urged by Appellants, instead recognizing “some latitude of a reasonable discretion . . . to the local authorities upon the facts of a case.” Id. A pair of cases from California struck down discriminatorily enforced quarantines. See Jew Ho v. Williamson, 103 F. 10, 26 (N.D. Cal. 1900) (“The evidence here is clear that this [quarantine] is made to operate against the Chinese population only . . . .”); Wong Wai v. Williamson, 103 F. 1, 7 (N.D. Cal. 1900) (granting injunction prohibiting government officials from enforcing a quarantine targeting Chinese individuals). But neither of these cases is analogous to the instant suit as both involved neighborhood-wide discriminatory quarantines. No similar allegations are made here. 32 enactment as will protect the public health and the public safety.” Jacobson v. Massachusetts, 197 U.S. 11, 25 (1905); Compagnie Francaise de Navigation a Vapeur v. State Bd. of Health, 186 U.S. 380, 387 (1902) (“[T]he power of the states to enact and enforce quarantine laws for the safety and the protection of the health of their inhabitants . . . is beyond question.”). The Court recognized that such measures could be unlawful if undertaken in “an arbitrary, unreasonable manner, or . . . go[ing] so far beyond what was reasonably required for the safety of the public . . . .” Jacobson, 197 U.S. at 28; see also id. at 31 (noting that courts may strike down public health statutes if they have “no real or substantial relation to those objects, or [are], beyond all question, a plain, palpable invasion of rights”). But of particular relevance here is the Supreme Court’s acknowledgement that: An American citizen arriving at an American port on a vessel in which, during the voyage, there had been cases of yellow fever or Asiatic cholera, . . . although apparently free from disease himself, may yet, in some circumstances, be held in quarantine against his will on board of such vessel or in a quarantine station, until it be ascertained by inspection, conducted with due diligence, that the danger of the spread of the disease among the community at large has disappeared. Id. at 29; see also United States v. Harris, 838 F.3d 98, 107 (2d Cir. 2016) (“[E]ven if the statement is fairly characterized as dictum, we are obligated ‘to accord great 33 deference to Supreme Court dicta, absent a change in the legal landscape.’” (quoting Newdow v. Peterson, 753 F.3d 105, 108 n.3 (2d Cir. 2014))). Since Jacobson, the Supreme Court has not addressed the limits imposed by due process on a State’s power to manage infectious diseases. Moreover, in a small number of decisions, other courts have adopted approaches more deferential than the least-restrictive-means test urged by Appellants. See, e.g., United States ex rel. Siegel v. Shinnick, 219 F. Supp. 789, 790–91 (E.D.N.Y. 1963) (upholding the decision to isolate a woman who arrived in the United States from a region infected with smallpox for the entire incubation period of the disease as “reached in obvious good faith” after “forthright, reasoned and circumstantially reassuring” consideration); People ex rel. Baker v. Strautz, 386 Ill. 360, 362, 364–65 (1944) (upholding statute authorizing isolation of criminal defendants who “may be suffering from any communicable venereal disease” on the grounds that “the courts will not interfere with the exercise of this power except where the regulations adopted for the protection of the public health are arbitrary, oppressive and unreasonable”). Appellants and the dissent contend that the trend nevertheless goes in the other direction and that courts have grown less deferential in modern times. See, 34 e.g., City of Newark v. J.S., 652 A.2d 265 (N.J. Super. Ct., Essex Cty. 1993) (discussing the least-restrictive-means test). But the cases do not bear out this purported trend. In Hickox v. Christie, for example, which arose out of the same Ebola crisis that gave rise to this appeal, the court concluded that “[t]he case law regarding the least restrictive means requirement falls far short of a clear consensus capable of defeating qualified immunity.” 205 F. Supp. 3d 579, 599 (D.N.J. 2016). That court’s review of the quarantine case law led it to suggest that the usual standard applied is one of “arbitrariness or unreasonableness.” Id. at 593; see also Daniels v. Maricopa Cty. Special Health Care Dist., No. CV-07-1080, 2009 WL 10708630, at 7 (D. Ariz. Oct. 20, 2009) (rejecting due process challenge to isolation of tuberculosis patient under a “reasonably related” standard). Nor do the smattering of state trial court decisions relied upon by the dissent change the analysis. Passing over the fact that such precedent cannot clearly establish law, see Matusick, 757 F.3d at 61, none of these decisions even purported to apply federal due process standards. Both In re City of New York v. Antoinette R., 165 Misc. 2d 1014 (N.Y. Sup. Ct., Queens Cty. 1995), and Mayhew v. Hickox, No. CV-2014-26 (Me. Dist. Ct., Oct. 31, 2014), assessed quarantine orders against the backdrop of state or municipal laws that incorporated a least-restrictive-means 35 test. Appellants and the dissent both emphasize that Connecticut’s quarantine law employs a least-restrictive-means test. See Conn. Gen. Stat. § 19a-131b(a). But the fact that Connecticut and other states have seen fit to adopt this test by statute is not relevant to our qualified immunity analysis. “[W]e have repeatedly held[] that a state statute does not serve as ‘clearly established law’ for purposes of qualified immunity.” Tooly v. Schwaller, 919 F.3d 165, 172 (2d Cir. 2019). Put another way, assuming arguendo that Appellees’ actions violated Connecticut law, “the court must [still] determine whether the conduct that violated the state statute also violates clearly established federal law, and this is a distinct and separate inquiry.” Id. at 173. In sum, there was by no means a “robust consensus” on the proper standard for analyzing quarantine claims at the time of the conduct at issue here. Wesby, 138 S. Ct. 591. To the extent the substantive due process restrictions articulated by Appellants existed then, they were “at best undeveloped.” Wilson v. Layne, 526 U.S. 603, 617 (1999). That district courts in this Circuit (Best and Shinnick, specifically) have employed different analyses only further “demonstrates that the law on the point [was] not well established.” Ziglar, 137 S. Ct. at 1868. 36 In such circumstances, where the precedent is simply not “clear enough that every reasonable official would interpret it to establish the particular rule the plaintiff seeks to apply,” Wesby, 138 S. Ct. at 589–90, the qualified immunity bar applies. As the Supreme Court has recognized, public officials cannot be expected “to predict the future course of constitutional law” based on their reading of a handful of non-precedential opinions. Wilson, 526 U.S. at 617–18 (quoting Procunier v. Navarette, 434 U.S. 555, 562 (1978)). It is “unfair” to subject such officials to damages liability when even “judges . . . disagree.” Id. at 618. Neither civil commitment law nor other infectious disease cases had clearly articulated the substantive due process standard Appellants urge should have governed Dr. Mullen’s actions. Accordingly, the district court did not err in affording qualified immunity as to this claim. B. Procedural Due Process Appellants next argue that Dr. Mullen violated procedural due process by failing: (1) to conduct an individualized assessment of Appellants’ risk to public health; (2) to provide timely notice of the process for judicial review; and (3) to initiate a judicial hearing whereby Appellants could challenge their detention. Again, however, Appellants are unable to point to clearly established law that 37 supports the conclusion that every reasonable official would have understood that these measures were required at the time the challenged events occurred. The inquiry into the existence of a procedural due process right is guided by the three-factor balancing test enunciated in Mathews v. Eldridge, 424 U.S. 319 (1976). At the start, because that analysis entails balancing multiple factors, procedural due process, “unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place and circumstances.” Gilbert v. Homar, 520 U.S. 924, 930 (1997) (quoting Cafeteria & Rest. Workers v. McElroy, 367 U.S. 886, 895, (1961)). Rather, “due process is flexible and calls for such procedural protections as the particular situation demands.” Morrissey v. Brewer, 408 U.S. 471, 481 (1972). “Given this flexible, context-dependent approach, it will be a rare case in which prior precedents have definitively resolved a novel claim of procedural due process. That makes particularly fertile ground for qualified immunity, given that state officials can be liable only for violations of rights that have been established ‘beyond debate’ and with ‘particular[ity]’ by existing constitutional precedents.” Francis v. Fiacco, 942 F.3d 126, 149 (2d Cir. 2019) (quoting White, 137 S. Ct. at 551–52). 38 Again, Appellants and the dissent rely almost exclusively upon cases imported from the civil commitment context or upon Connecticut state law. But as already explained, the civil commitment cases are insufficiently analogous to clearly establish the procedural rights Appellants urge us to adopt in this case. See Levin v. Adalberto M., 156 Cal. App. 4th 288, 298–02 (2007) (referring, in dicta, to civil commitment context as “analogous” to the civil detention of a tuberculosis patient but noting that infectious diseases like tuberculosis “differ[] from mental illness in ways that justify fewer procedural safeguards, not more”). And “[a] violation of state law neither gives plaintiffs a § 1983 claim nor deprives defendants of the defense of qualified immunity to a proper § 1983 claim.” Doe v. Conn. Dep’t of Child & Youth Servs., 911 F.2d 868, 869 (2d Cir. 1990). Indeed, we have been unable to find—and Appellants do not identify—any cases articulating federal procedural due process protections in the quarantine context. The most analogous case, Greene v. Edwards, 164 W. Va. 326, 327–29 (1980) (per curiam), held that due process guarantees certain procedural rights— including adequate notice, a right to counsel, and an elevated burden of proof— when the state seeks to involuntarily confine an individual with tuberculosis. See also Kirk v. Wyman, 83 S.C. 372, 390 (1909) (“[B]oards of health may not deprive any 39 person of his property or his liberty, unless the deprivation is made to appear, by due inquiry, to be reasonably necessary to the public health; and such inquiry must include notice to the person whose property or liberty is involved, and the opportunity to him to be heard, unless the emergency appears to be so great that such notice and hearing could be had only at the peril of the public safety.”). But the Supreme Court of Appeals of West Virginia relied primarily on state law to reach this conclusion. See Greene, 164 W. Va. at 327–29. And cases from both the Supreme Court and our Court make clear that the federal procedural due process guarantee does not require state officials to inform individuals of all the procedural guarantees they enjoy under state law. See City of W. Covina v. Perkins, 525 U.S. 234, 240-41 (1999) (holding that a city that seizes an owner’s property must inform the owner that “his property has been seized” but “need not take other steps to inform him of his [legal] options” because he “can turn to . . . public sources to learn about the remedial procedures available to him”); United States v. Lopez, 445 F.3d 90, 95 (2d Cir. 2006) (Sotomayor, J.) (holding that failure to inform an alien in deportation proceedings of his right to seek habeas review did not deny him meaningful judicial review because “where judicial remedies are readily available 40 in case law and statutes, due process is not offended where no notice of those remedies is provided”). The rationale of Perkins and Lopez has at least arguable purchase here, where Boyko, Skrip, and the Mensah-Siehs all did receive notice that they were subject to a mandatory quarantine, and where post-quarantine hearings were available to them under Connecticut law, see Conn. Gen. Stat. § 19a-131b. While the full panoply of their rights under state law was not immediately conveyed to them in writing, nor was a hearing convened, Appellants point to no case that clearly establishes that Dr. Mullen violated the Constitution by failing to undertake these measures. C. The Fourth Amendment Finally, Appellants assert that “Dr. Mullen’s over-inclusive sweep was not reasonable under the Fourth Amendment,” Appellants Br. 48, because in quarantining Boyko, Skrip, and the Mensah-Siehs, she “depart[ed] from what is scientifically justified for a particular disease,” Appellants Reply Br. 9 (quotation marks omitted). According to Appellants, “all Plaintiffs had no known exposure to Ebola,” Appellants Br. 39, Boyko had undergone several blood tests confirming that he did not have the disease, and Boyko and Skrip had been assured by CDC 41 representatives that any interactions with a person in their hotel who later developed symptoms posed no risk. This claim is essentially the same as their substantive due process claim but is recast in Fourth Amendment terms. Qualified immunity affords especial protection to state officials in the Fourth Amendment context. See Wesby, 138 S. Ct. at 590 (holding that the “specificity” requirement is “especially important in the Fourth Amendment context”) (quoting Mullenix, 136 S. Ct. at 308). The Supreme Court has observed, for instance, that “[p]robable cause ‘turn[s] on the assessment of probabilities in particular factual contexts’ and cannot be ‘reduced to a neat set of legal rules.’” Id. (quoting Illinois v. Gates, 462 U.S. 213, 232 (1983)). Therefore, a plaintiff must “identify a case where an officer acting under similar circumstances . . . was held to have violated the Fourth Amendment.” Id. (quoting Pauly, 137 S. Ct. at 522). Appellants have cited no case in which a court has invalidated a quarantine order under the Fourth Amendment. And although they characterize their quarantines as “scientifically unjustified,” Appellants Br. 58, a number of factors could support a determination that the quarantines were at least arguably reasonable as a matter of Fourth Amendment law. Cf. Camara v. Mun. Ct. of City & Cty. of S.F., 387 U.S. 523, 538 (1967) (“Where considerations of health and safety 42 are involved, the facts that would justify an inference of ‘probable cause’ to make an inspection are clearly different from those that would justify such an inference where a criminal investigation has been undertaken.” (quoting Frank v. Maryland, 359 U.S. 360, 383 (1959) (Douglas, J., dissenting)). Put simply, it was not clearly established that it was unreasonable, pursuant to the Fourth Amendment, for Appellees to quarantine individuals traveling from a nation suffering from an Ebola epidemic for the duration of the disease’s incubation period. And in such circumstances, Dr. Mullen is entitled to qualified immunity. To be clear, we need not and do not reach the merits of Appellants’ constitutional claims. We conclude simply that the district court did not err in determining that no clearly established law existed at the time of Dr. Mullen’s actions such that every reasonable official would have known that her conduct fell outside the boundaries of due process and Fourth Amendment constraints. No significant precedent had previously articulated the requirements of substantive due process, procedural due process, or the Fourth Amendment in the quarantine or infectious diseases contexts, as urged by Appellants here. In such circumstances, the district court properly concluded that Dr. Mullen is entitled to qualified immunity. 43 CONCLUSION We have considered Appellants’ remaining arguments and find them to be without merit. For the foregoing reasons, we AFFIRM the judgment of the district court but REMAND with instructions to amend the judgment to clarify that the state law claims were dismissed without prejudice. 44 CHIN, Circuit Judge, concurring in part and dissenting in part: I concur in the majority's decision to affirm the dismissal of the claims for prospective or injunctive relief for lack of standing and the denial of class certification, but I dissent as to its holding that the claims for damages are barred by qualified immunity. As we have seen most strikingly with the current epidemic, the government surely has a compelling interest in preventing the spread of disease. At the same time, however, the government's power to protect the community may not be exercised in an unreasonable or arbitrary manner. While intrusions on personal liberties will of course be necessary to safeguard public health and safety, they must be based on scientific and not political considerations. In my view, plaintiffs-appellants Ryan Boyko and Laura Skrip and Louise Mensah-Sieh, Nathaniel Sieh, and their children (collectively, "plaintiffs") plausibly alleged that defendant-appellee Dr. Jewel Mullen, then-Commissioner of Public Health, violated their constitutional rights by ordering them, in connection with the Ebola outbreak in 2014, into quarantine for two weeks in the case of Boyko and Skrip and three weeks in the case of the Mensah-Sieh family, when quarantine was not scientifically or medically warranted or justified. Moreover, in my view, plaintiffs plausibly alleged violations of clearly established rights such that, at the pleadings stage of the case, it was error for the district court to dismiss these claims based on qualified immunity. Accordingly, I would reverse as to plaintiffs' claims for damages. I. A. More than a century ago, the Supreme Court recognized the need to balance the government's interest in protecting the public health and safety by controlling the spread of disease against the rights of individuals to be free from unreasonable restraint. In Jacobson v. Massachusetts, in upholding the authority of states to require vaccinations in response to an outbreak of smallpox, the Supreme Court acknowledged that a state's power to fight the spread of disease is not without limit: [I]t might be that an acknowledged power of a local community to protect itself against an epidemic threatening the safety of all might be exercised in particular circumstances and in reference to particular persons in such an arbitrary, unreasonable manner, or might go so far beyond what was reasonably required for the safety of the public, as to authorize or compel the courts to interfere for the protection of such persons. 197 U.S. 11, 28 (1905). The Court also emphasized that: 2 if a statute purporting to have been enacted to protect the public health, the public morals, or the public safety, has no real or substantial relation to those objects, or is, beyond all question, a plain, palpable invasion of rights secured by the fundamental law, it is the duty of the courts to so adjudge, and thereby give effect to the Constitution. Id. at 31. This reasoning, of course, applies not just to statutes but to any governmental restriction on individual rights taken ostensibly to protect public health and safety. It has long been established that the Due Process Clauses of the Fifth and Fourteenth Amendments prohibit the government from infringing on "'fundamental' liberty interests . . . unless the infringement is narrowly tailored to serve a compelling state interest." Reno v. Flores, 507 U.S. 292, 301-02 (1993). Indeed, "even though the governmental purpose be legitimate and substantial, that purpose cannot be pursued by means that broadly stifle fundamental personal liberties when the end can be more narrowly achieved." Shelton v. Tucker, 364 U.S. 479, 488 (1960). "Freedom from bodily restraint has always been at the core of the liberty protected by the Due Process Clause," Foucha v. Louisiana, 504 U.S. 71, 80 (1992), and "[i]t is clear that 'commitment for any purpose constitutes a significant deprivation of liberty that requires due process protection,'" Jones v. United States, 3 463 U.S. 354, 361 (1983) (emphasis added) (quoting Addington v. Texas, 441 U.S. 418, 425 (1979)); accord Project Release v. Prevost, 722 F.2d 960, 971 (2d Cir. 1983) ("Civil commitment for any purpose requires due process protection.") (emphasis added). Hence, a government-imposed quarantine implicates the Constitution, as mandatory quarantine is a form of civil detention -- an involuntary confinement and a deprivation of liberty. Courts have applied these due process concepts to quarantine or similar isolation orders and considered whether the restrictions were reasonable in relation to the goal of protecting the health of others. In Jolly v. Coughlin, for example, this Court upheld a preliminary injunction barring prison officials from keeping an inmate in "medical keeplock" after he refused, for religious reasons, to take a tuberculosis test, where he did not have active tuberculosis and could be monitored for tuberculosis by other means. 76 F.3d 468, 479-80 (2d Cir. 1996). In two cases involving the detention of individuals with tuberculosis who were either unwilling or unable to comply with medical directives, the courts applied due process principles. While the courts ultimately determined that isolation was the best option in both cases, they considered whether less restrictive means were available. See City of Newark v. J.S., 279 N.J. Super. Ct. Law Div. 178, 184-85 4 (1993); Matter of City of New York v. Antoinette R., 630 N.Y.S.2d 1008, 1019 (N.Y. Sup. Ct. 1995). In an Ebola case in Maine, the court concluded that isolation was not required to protect others from the danger of infection, determining that a less restrictive monitoring order was sufficient. See Mayhew v. Hickox, No. CV- 2014-36 (Dist. Ct., Fort Kent, ME Oct. 31, 2014); cf. Hickox v. Christie, 205 F. Supp. 3d 579, 593-94 (D.N.J. 2016) (dismissing federal claims brought by nurse who was subjected to mandatory quarantine, based on qualified immunity doctrine). And years ago, in Jew Ho v. Williamson, the court found that an ordinance sealing off an area of San Francisco in such a way as "to operate against the Chinese population only," purportedly to prevent the spread of the bubonic plague, 103 F. 10, 23 (Cir. Ct. N.D. Ca. 1900), was "unreasonable, unjust, and oppressive," id. at 26. 1 In Connecticut, due process protections are expressly written into the statute governing quarantine. The Connecticut statute provides (and provided in 2014) that "[t]he commissioner . . . may order into quarantine or 11 See also Wong Wai v. Williamson, 103 F. 1, 3, 7 (Cir. Ct. N.D. Ca. 1900) (striking down regulation requiring inoculation of "all the Chinese residents" of the city and county of San Francisco against the bubonic plague and restricting their ability to travel, as discriminatory and not supported by any evidence that "the Asiatic or Mongolian race . . . [was] more liable to the plague than any other"). 5 isolation, as appropriate, any individual . . . or individuals . . . if the commissioner determines that such individual or individuals pose a significant threat to the public health and that quarantine or isolation is necessary and the least restrictive alternative to protect or preserve the public health." Conn. Gen. Stat. Ann. § 19a-131b(a) (emphasis added). Even "[w]hen government action depriving a person of life, liberty, or property survives substantive due process scrutiny," procedural due process requires that the action "still be implemented in a fair manner." United States v. Salerno, 481 U.S. 739, 746 (1987). This generally requires consideration of three distinct factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. Mathews v. Eldridge, 424 U.S. 319, 335 (1976). Procedural due process applies to involuntary confinement. See, e.g., Hamdi v. Rumsfeld, 542 U.S. 507, 529 (2004). This is because "[p]rocedural due process imposes constraints on governmental decisions which deprive 6 individuals of 'liberty' or 'property' interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment." Eldridge, 424 U.S. at 332. Although "the Court usually has held that the Constitution requires some kind of hearing before the State deprives a person of liberty," Zinermon v. Burch, 494 U.S. 113, 127 (1990), "post-deprivation hearings are appropriate and constitutionally permissible in emergency situations," Bailey v. Pataki, 708 F.3d 391, 406 (2d Cir. 2013). Notably, Connecticut law also guarantees a written quarantine order that informs the recipient of the right to a hearing and how to request it; an individuated assessment of risk; and an opportunity to seek post-deprivation judicial review. Conn. Gen. Stat. § 19a-131b(c), (d), (f). B. In my view, plaintiffs plausibly alleged both substantive and procedural due process violations. First, the complaint alleges that Boyko and Skrip as well as the Mensah-Sieh family were involuntarily confined and deprived of their fundamental right to liberty, for two weeks as to Boyko and Skrip and three weeks as to the Mensah-Sieh family, after arriving in the United States from Liberia. Police officers were stationed outside their homes to enforce the 7 quarantine orders. As alleged in the complaint, the quarantine caused plaintiffs to suffer physically, emotionally, and financially. For example, Boyko was "cut off from family, friends, and colleagues," he was unable to spend time with his son, his girlfriend was prohibited by the quarantine order from entering their shared apartment, and he was unable to meet his employment obligations. J. App'x at 37. Skrip's research and work at Yale as well as her volunteer activities were adversely impacted. And the inability of the Mensah-Sieh family to leave their residence (a single room in a basement for six individuals) "severely diminish[ed] their everyday life activities including family relations, social contacts, work options, economic independence, educational advancement, and cultural enrichment." J. App'x at 48. Second, the complaint alleges -- in great detail and with ample support -- that quarantine was not necessary in the circumstances here and that less restrictive alternatives existed to protect public health and safety. As alleged in the complaint, by the time the quarantine orders were issued in Fall 2014, doctors and scientists had been dealing with Ebola for some twenty-two months and the science was well-established. "The overwhelming consensus in the scientific community at the time was, and remains, that asymptomatic 8 individuals cannot transmit Ebola and do not require quarantine." J. App'x at 29. Rather, Ebola "is spread through direct physical contact with the bodily fluids of a symptomatic person, the body of a person who has died from Ebola, or objects contaminated with the virus, such as used needles." J. App'x at 26. Symptoms include fever, headache, joint and muscle pain, diarrhea, and vomiting. Unlike diseases such as tuberculosis (and COVID-19), Ebola cannot be spread through the air. According to the complaint, on August 22, 2014, the Centers for Disease Control and Prevention (the "CDC") released guidance for monitoring "asymptomatic individuals returning from West Africa with 'no risk' or 'low risk' of exposure" to Ebola, and it "recommended only self-monitoring or active monitoring for twenty-one days and recommended no movement restrictions or quarantine." J. App'x at 27. The guidance did not recommend quarantine even for individuals with a high risk of exposure. As the public health experts point out in their amici brief, overly restrictive responses to epidemics have adverse consequences, as health care professionals, scientists and epidemiologists, and aid workers will be deterred from traveling to impacted countries to provide medical help and other assistance. 9 In October 2014, the CDC, in conjunction with the Department of Homeland Security ("DHS"), implemented a screening process for individuals arriving in the United States from Liberia, Guinea, and Sierra Leone, ensuring that they had no symptoms or a known history of exposure to Ebola before permitting them to exit the airport, and referring them to the appropriate state or local health authorities if circumstances warranted. Plaintiffs were asymptomatic when they arrived in the United States from Liberia, and they had not been in contact with symptomatic individuals. They went through the CDC screening procedures and were cleared to enter the country. While Boyko developed a fever at one point after returning to the United States, he was given a blood test which came back negative for Ebola (in fact, he was tested three times, with a negative result each time). The complaint alleges that Dr. Mullen and other state officials knew that plaintiffs were "not sick and not a risk to public health." J. App'x at 29 (quoting statement made by a Department of Public Health spokesperson in October 2014). Yet, the complaint alleges, they ordered plaintiffs into quarantine, even though they knew that quarantine was not necessary and that alternative, less restrictive measures -- such as monitoring -- were available to protect the public health and safety. Connecticut's quarantine 10 program did not provide for individual risk assessments of travelers from affected countries, and did not, for example, consider whether they had had past contact with Ebola-infected persons. Rather, the policy required that all asymptomatic individuals arriving from an affected country were to be quarantined at home for twenty-one days. Moreover, the complaint further alleges that on October 27, 2014, the Connecticut officials revised their quarantine guidelines so that asymptomatic travelers arriving from affected areas were subject only to active monitoring, unless an individualized assessment determined quarantine was necessary. The officials did not, however, release plaintiffs from quarantine or review whether continued quarantine was necessary. Third, the complaint alleges that the Mensah-Sieh family did not receive written notice of the quarantine order or any information about their right to challenge the quarantine order. It alleges that Skrip did not receive any such information either, until she requested it five days after she was orally informed of her quarantine. Moreover, the complaint alleges that plaintiffs did not receive individualized consideration of whether quarantine was warranted in their cases, either initially or after the state changed its policies. 11 In short, in my view the complaint alleges, plausibly and with great detail, that Dr. Mullen and the other state officials infringed on plaintiffs' fundamental right to liberty, without justification or individualized consideration, when alternative, less restrictive measures were available to protect the public health and safety. II. A. Qualified immunity "protects government officials from suits seeking to impose personal liability for money damages based on unsettled rights or on conduct that was not objectively reasonable." Tenenbaum v. Williams, 193 F.3d 581, 595-96 (2d Cir. 1999). In assessing a qualified immunity defense, the court must "accept as true all well-pled factual allegations, and draw all reasonable inferences in the plaintiff's favor." Warney v. Monroe Cty., 587 F.3d 113, 116 (2d Cir. 2009). "The defendant bears the burden of pleading and proving the affirmative defense of qualified immunity." Blissett v. Coughlin, 66 F.3d 531, 539 (2d Cir. 1995); see also Jackler v. Byrne, 658 F.3d 225, 242 (2d Cir. 2011). To determine whether an individual is entitled to qualified immunity, the court must "engage in a two-part inquiry: whether the facts 12 shown 'make out a violation of a constitutional right,' and 'whether the right at issue was clearly established at the time of defendant's alleged misconduct.'" Taravella v. Town of Wolcott, 599 F.3d 129, 133 (2d Cir. 2010) (quoting Pearson v. Callahan, 55 U.S. 223, 232 (2009)). While there need not be "a case directly on point for a right to be clearly established, existing precedent must have placed the statutory or constitutional question beyond debate." White v. Pauly, 137 S. Ct. 548, 551 (2017) (citation omitted). As discussed above, in my view the facts alleged in the complaint make out a violation of plaintiffs' rights to substantive and procedural due process. Similarly, in my view these rights were clearly established when Dr. Mullen and the other state officials required plaintiffs to be quarantined. I believe it was error for the district court, on a motion to dismiss when it should have assumed the factual allegations of the complaint to be true, to sustain the affirmative defense of qualified immunity as a matter of law. The district court held that Dr. Mullen's actions did not violate clearly established law because there is no case law regarding an individual's substantive and procedural due process rights in a quarantine scenario, and that, in any event, quarantine here was "objectively reasonable." Liberian Cmty. Ass'n 13 of Connecticut v. Malloy, No. 3:16-CV-00201(AVC), 2017 WL 4897048, at *9 (D. Conn. Mar. 30, 2017). As discussed above, however, there are some quarantine and other isolation cases, as well as other analogous cases, including, for example, civil commitment cases dealing with compulsory confinement to protect public safety. And while it may be true that there have been few epidemic cases over the years, the Supreme Court has noted that a "general constitutional rule already identified in the decisional law may apply with obvious clarity to the specific conduct in question, even though 'the very action in question has [not] previously been held unlawful.'" United States v. Lanier, 520 U.S. 259, 271 (1997) (quoting Anderson v. Creighton, 483 U.S. 635, 640 (1987)). The general constitutional rules discussed above are beyond debate. Freedom from physical restraint is a fundamental liberty interest that cannot be infringed upon by the government unless the restriction is narrowly tailored to further a compelling state interest and less restrictive alternatives to accomplish that goal are not available. See, e.g., Reno, 507 U.S. at 301-02; Shelton, 364 U.S. at 488. Moreover, even assuming some ambiguity in the case law, the Connecticut statute -- which incorporates due process protections -- applies with obvious clarity here, as the statute specifically provides that quarantine may be ordered 14 only if necessary to protect the public health, and only if quarantine is the least restrictive alternative available. The complaint alleges in great detail that, given the nature of Ebola, the CDC, scientists, and health experts uniformly agreed that quarantine was not necessary for individuals like plaintiffs, who were asymptomatic and who were no-risk or low-risk for Ebola exposure, and that less restrictive alternatives, such as active monitoring, were available to protect the public. Hence, the complaint plausibly alleges that it was not objectively reasonable for Dr. Mullen and the other state officials to order plaintiffs into quarantine, and to have done so without proper notice or individualized assessment or other procedural safeguards. Finally, I note that the complaint plausibly alleges that the Connecticut officials did not act in good faith, as they purportedly imposed quarantine on plaintiffs not based on scientific or medical reasons but for political reasons. The complaint alleges that Dr. Mullen and other state officials knew that quarantine was not necessary to protect the public health. But in October 2014, the Governor of Connecticut was "actively campaigning to be re- elected . . . [and p]ublic polling and media accounts at the time described the gubernatorial race as extremely close." J. App'x at 27. The Connecticut officials 15 adopted a policy, as the Governor's office apparently touted, that was "more stringent" than guidelines issued by the CDC, one that mandated quarantine even for asymptomatic individuals, when quarantine was not scientifically justified. J. App'x at 28-29. The complaint alleges that the state officials ordered plaintiffs to be quarantined and then continued them in quarantine, even though they knew plaintiffs did not present a risk to public health, because of "sensationalist news accounts [that] stoked public fear that travelers might bring Ebola across the ocean to [Connecticut]." J. App'x at 20. These allegations, in my view, are plausible. Accordingly, I dissent from the majority's affirmance of the district court's dismissal of plaintiffs' claims for damages. 16	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/4555576/	In the United States Court of Federal Claims OFFICE OF SPECIAL MASTERS No. 18-262V ************************* * BONNIE WEIN, as personal representative * TO BE PUBLISHED * of the Estate of Linda Carl, deceased, on behalf of the surviving children and heirs of * Special Master Katherine E. Oler * Linda Carl, Robert L. Fish, Jr., James H. Waite, and Michael C. Waite,* Filed: July 1, 2020 * Petitioner, * * Attorneys’ Fees & Costs; v. * Reasonable Basis; Prevnar-13 Vaccine * SECRETARY OF HEALTH AND * HUMAN SERVICES, * * Respondent. * ************************* * Vanessa L. Brice, Colling, Gilbert, Wright & Carter, Orlando, FL, for Petitioner. Heather L. Pearlman, U.S. Department of Justice, Washington, D.C., for Respondent. DECISION ON MOTION FOR FINAL ATTORNEYS’ FEES AND COSTS1 On February 20, 2018, Bonnie Wein (“Petitioner”) filed a petition as administrator of the Estate of Linda Carl, seeking compensation under the National Vaccine Injury Compensation Program (the “Vaccine Program”)2 alleging that Ms. Carl died on January 25, 2017 as a result of the pneumococcal conjugate (“PCV-13”) vaccine she received on January 17, 2017. Pet. at 1, ECF No. 1. 1 This Decision will be posted on the Court of Federal Claims’ website. This means the decision will be available to anyone with access to the internet. As provided by 42 U.S.C. § 300aa-12(d)(4)(B), however, the parties may object to the decision’s inclusion of certain kinds of confidential information. Specifically, under Vaccine Rule 18(b), each party has fourteen days within which to request redaction “of any information furnished by that party: (1) that is a trade secret or commercial or financial in substance and is privileged or confidential; or (2) that includes medical files or similar files, the disclosure of which would constitute a clearly unwarranted invasion of privacy.” Vaccine Rule 18(b). If, upon review, I agree that the identified materials fit within this definition, I will redact such material from public access. Otherwise, the Decision in its present form will be available. Id. 2 The Vaccine Program comprises Part 2 of the National Childhood Vaccine Injury Act of 1986, Pub. L. No. 99-660, 100 Stat. 3758, codified as amended at 42 U.S.C. §§ 300aa-10 through 34 (2012) (“Vaccine Act” or “the Act”). Individual section references hereafter will be to § 300aa of the Act (but will omit that statutory prefix). 1 Respondent filed his Rule 4(c) Report on March 1, 2019 recommending that compensation be denied. ECF No. 21. On April 17, 2019, I held a status conference where I explained to Petitioner’s counsel that the medical records and affidavits filed did not establish causation-in-fact.3 See Scheduling Order of April 19, 2019 at 1, ECF No. 23. Petitioner’s counsel indicated that finding an expert to support the case had been “difficult” and that Petitioner has decided not to file an expert report. Id. I informed counsel that I did not believe the case possessed a reasonable basis and recommended that she speak with her client about dismissing the petition. Id. Petitioner filed a Motion for a Dismissal Decision on April 30, 2019. ECF No. 24. I issued a decision dismissing the petition for insufficient proof on that same day. ECF No. 25. On November 26, 2019, Petitioner filed a Motion for Attorneys’ Fees and Costs requesting a total of $25,930.98. Fees App., ECF No. 28. Petitioner requested attorneys’ fees in the amount of $22,455.004 and costs in the amount of $3,475.98. Id. at 1. Respondent submitted his response in opposition to Petitioners’ motion on May 31, 2019. Fees Resp., ECF No. 29. Petitioner did not file a reply. For the reasons set forth below, I find that Petitioner did not have a reasonable basis to file the petition. Therefore, her motion for attorneys’ fees and costs is denied. I. Relevant Medical History Linda Carl was born on January 14, 1949. Pet. at 1. On July 18, 2014, Ms. Carl presented to Dr. Chinemyenwa Usoh for evaluation of thyroid nodules. ECF No. 12, at 36.5 She had a past medical history of gastroesophageal reflux disease (GERD), hypertension, depression, anxiety, stress incontinence, lumbosacral spondylosis without myelopathy (diagnosed September 6, 2012), psoriasis and iritis. Id. She also had received several surgeries: hysterectomy, cholecystectomy, eye surgery, and rectocele repair. Id. By November 30, 2016, Ms. Carl had also been diagnosed with degenerative joint disease, osteopenia, perennial allergic rhinitis, overactive bladder, and ischemic colitis. Id. at 1. In addition, at this visit, she had severe pain in her right shoulder and right arm. Id. On January 17, 2017, Ms. Carl received the allegedly causal PCV-13 vaccination in her left shoulder. ECF No. 1-2 at 2. 3 I note that the record has not been supplemented with additional medical records or expert reports since this status conference. 4 As Petitioner did not include a specific total in her Motion, this number was calculated by taking Petitioner’s customary billing rate ($450.00/hour) and multiplying it by the number of hours worked (49.9). See Fees App. at 1 (billing rate) and 5 (total number of hours worked). 5 As Petitioner did not file exhibits with exhibit numbers, I have referred to medical records and affidavits by their docket numbers in this Decision. 2 Ms. Carl was transported to the emergency room on January 25, 2020 at 7:45pm in cardiac arrest. ECF 11-3 at 13. The records indicate that she had been found unresponsive in her home. Id. Her preceding symptoms were listed as unknown, while her “[r]isk factors consist[ed] of hypertension.” Id. Medical providers stopped CPR at 7:57pm and Ms. Carl was pronounced dead at that time. Id. at 14. Ms. Carl’s death certificate listed her cause of death as “hypertensive cardiovascular disease”. ECF No. 1-2 at 1. II. Affidavits Petitioner, Ms. Carl’s sister, submitted an affidavit. In it, she stated that on January 25, 2017, Ms. Carl left Petitioner’s husband a voicemail in which she stated: Hi, this is Linda. Just wanted to let you guys know that I’m really sick. I’ve been sick like this since probably Friday and over the weekend with chills and stuff and I don’t have a thermometer. Just wanted to let you know in case I get worse or something. ECF No. 11-1 at 1. Petitioner’s husband went to check on Ms. Carl and found her unresponsive. Id. She was taken to a hospital and pronounced dead at 7:57pm. Id. Ms. Carl’s son, Robert Fish, also submitted an affidavit. ECF No. 11-2. In his affidavit he stated that he spoke to Ms. Carl on January 24, 2017. According to Mr. Fish, Ms. Carl told him that “She had recently received a routine dose of the PCV-13 vaccine…at Walgreens pharmacy and was having a reaction to the shot.” Id. at 2. III. Parties’ Arguments In his response to Petitioners’ motion for attorneys’ fees and costs, Respondent argues that the petition lacked reasonable basis. Respondent claims that “the objective evidence in the record fails to demonstrate a reasonable basis.” Fees Resp. at 4. Respondent states that “there is no evidence linking the vaccine to Linda Carl’s death and the evidence demonstrates that the death was instead due to a hypertensive cardiovascular disease.” Id. at 4. IV. Legal Standard Under the Vaccine Act, an award of reasonable attorneys’ fees and costs is presumed where a petition for compensation is granted. Where compensation is denied, or a petition is dismissed, as it was in this case, the special master must determine whether the petition was brought in good faith and whether the claim had a reasonable basis. § 15(e)(1). A. Good Faith The good faith requirement is met through a subjective inquiry. Di Roma v. Sec’y of Health & Human Servs., No. 90-3277V, 1993 WL 496981, at 1 (Fed. Cl. Spec. Mstr. Nov. 18, 1993). Such a requirement is a “subjective standard that focuses upon whether [P]etitioner honestly 3 believed he had a legitimate claim for compensation.” Turner v. Sec’y of Health & Human Servs., No. 99-544V, 2007 WL 4410030, at 5 (Fed. Cl. Spec. Mstr. Nov. 30, 2007). Without evidence of bad faith, “petitioners are entitled to a presumption of good faith.” Grice v. Sec’y of Health & Human Servs., 36 Fed. Cl. 114, 121 (1996). Thus, so long as Petitioner had an honest belief that his claim could succeed, the good faith requirement is satisfied. See Riley v. Sec’y of Health & Human Servs., No. 09-276V, 2011 WL 2036976, at 2 (Fed. Cl. Spec. Mstr. Apr. 29, 2011) (citing Di Roma, 1993 WL 496981, at 1); Turner, 2007 WL 4410030, at 5. B. Reasonable Basis Unlike the good-faith inquiry, an analysis of reasonable basis requires more than just a petitioner’s belief in his claim. Turner, 2007 WL 4410030, at 6-7. Instead, the claim must at least be supported by objective evidence -- medical records or medical opinion. Sharp-Roundtree v. Sec’y of Health & Human Servs., No. 14-804V, 2015 WL 12600336, at 3 (Fed. Cl. Spec. Mstr. Nov. 3, 2015). While the statute does not define the quantum of proof needed to establish reasonable basis, it is “something less than the preponderant evidence ultimately required to prevail on one’s vaccine-injury claim.” Chuisano v. United States, 116 Fed. Cl. 276, 283 (2014). The Court of Federal Claims affirmed in Chuisano that “[a]t the most basic level, a petitioner who submits no evidence would not be found to have reasonable basis….” Id. at 286. The Court in Chuisano found that a petition which relies on temporal proximity and a petitioner’s affidavit is not sufficient to establish reasonable basis. Id. at 290. See also Turpin v. Sec'y Health & Human Servs., No. 99- 564V, 2005 WL 1026714, 2 (Fed. Cl. Spec. Mstr. Feb. 10, 2005) (finding no reasonable basis when petitioner submitted an affidavit and no other records); Brown v. Sec'y Health & Human Servs., No. 99-539V, 2005 WL 1026713, 2 (Fed. Cl. Spec. Mstr. Mar. 11, 2005) (finding no reasonable basis when petitioner presented only e-mails between her and her attorney). Temporal proximity between vaccination and onset of symptoms is a necessary component in establishing causation in non-Table cases, but without more, temporal proximity alone “fails to establish a reasonable basis for a vaccine claim.” Chuisano, 116 Fed. Cl. at 291. The Federal Circuit has stated that reasonable basis “is an objective inquiry” and concluded that “counsel may not use [an] impending statute of limitations deadline to establish a reasonable basis for [appellant’s] claim.” Simmons v. Sec’y of Health & Human Servs., 875 F.3d 632, 636 (Fed. Cir. 2017). Further, an impending statute of limitations should not even be one of several factors the special master considers in her reasonable basis analysis. “[T]he Federal Circuit forbade, altogether, the consideration of statutory limitations deadlines—and all conduct of counsel—in determining whether there was a reasonable basis for a claim.” Amankwaa v. Sec’y of Health & Human Servs., 138 Fed. Cl. 282, 289 (2018). “[I]n deciding reasonable basis the [s]pecial [m]aster needs to focus on the requirements for a petition under the Vaccine Act to determine if the elements have been asserted with sufficient evidence to make a feasible claim for recovery.” Santacroce v. Sec’y of Health & Human Servs., No. 15-555V, 2018 WL 405121, at 7 (Fed. Cl. Jan. 5, 2018). Special masters cannot award compensation “based on the claims of petitioner alone, unsubstantiated by medical records or by 4 medical opinion.” 42 U.S.C. § 300aa-13(a)(1). Special masters and judges of the Court of Federal Claims have interpreted this provision to mean that petitioners must submit medical records or expert medical opinion in support of causation-in-fact claims. See Waterman v. Sec'y of Health & Human Servs., 123 Fed. Cl. 564, 574 (2015) (citing Dickerson v. Sec'y of Health & Human Servs., 35 Fed. Cl. 593, 599 (1996) (stating that medical opinion evidence is required to support an on- Table theory where medical records fail to establish a Table injury)). When determining if a reasonable basis exists, many special masters and judges consider a myriad of factors. The factors to be considered may include “the factual basis of the claim, the medical and scientific support for the claim, the novelty of the vaccine, and the novelty of the theory of causation.” Amankwaa, 138 Fed. Cl. at 289. This approach allows the special master to look at each application for attorneys’ fees and costs on a case-by-case basis. Hamrick v. Sec’y of Health & Human Servs., No. 99-683V, 2007 WL 4793152, at *4 (Fed. Cl. Spec. Mstr. Nov. 19, 2007). V. Discussion A. Good Faith Petitioners are entitled to a presumption of good faith. See Grice, 36 Fed. Cl. 114 at 121. Respondent has not raised an issue with respect to good faith in this matter. See Fees Resp. Based on my own review of the case, I find that Petitioner acted in good faith when filing this petition. B. Reasonable Basis for the Claims in the Petition The reasonable basis standard is objective and requires Petitioner to submit evidence in support of the petition. The petition in this case alleges that Ms. Carl received the PCV-13 vaccine on January 17, 2017. Pet. at 1. The petition then states that Ms. Carl died on January 25, 2017 as a result of vaccine injury. Id. As discussed in further detail below, I do not find these claims articulated in the petition to be supported by objective evidence. 1. Petitioner has not Presented Evidence of Causation The special master’s analysis of reasonable basis should center around “an objective evaluation of the relevant medical information that served as the basis for petitioner’s claim.” Frantz v. Sec’y of Health & Human Servs., 2019 WL 6974431 (Fed. Cl. 2019) (denying motion for review). An examination of the relevant medical information demonstrates that Petitioner has not presented evidence (medical records or medical opinion) that the PCV-13 vaccine that Ms. Carl received on January 17, 2017 caused her death on January 25, 2017. As an initial matter, Petitioner filed few medical records, and none that substantiated her claim that the PCV-13 vaccine caused Ms. Carl’s death. See ECF No. 12. The medical records indicate that Ms. Carl suffered from myriad pre-existing conditions, but there is no mention of an injury related to vaccination. See generally id. Furthermore, in no medical record does there exist a discussion between Ms. Carl and her physician regarding Ms. Carl’s receipt of the PCV-13 vaccine. Id. In fact, no medical records between January 17, 2017 (the date of vaccination) and 5 January 25, 2017 (date of death) were filed. In short, there is no medical record evidence that links Ms. Carl’s vaccination to her death. Further, Ms. Carl’s death certificate did not make any mention of the PCV-13 vaccination. In fact, the death certificate lists hypertensive cardiovascular disease as Ms. Carl’s cause of death. ECF No. 1-2 at 1. In addition to the absence of medical record support for vaccine causation, Petitioner did not file an expert report articulating a link between Ms. Carl’s vaccination and her death. In fact, Petitioner affirmatively indicated that she did not intend to file such a report. See ECF No. 23 at 1. Because she has not submitted medical records or medical opinion (either from treating physicians or from an expert) that link Ms. Carl’s vaccination to her death, Petitioner has not submitted objective evidence in support of her petition and does not have a reasonable basis for her claim. 2. Statements in the Petition and Affidavits not Supported by the Record do not Establish Reasonable Basis As previously discussed, none of the medical records filed in this case support vaccine causation. The affidavit from Robert Fish filed by Petitioner states that: My mother [Linda Carl] and I spoke by phone on January 24, 2017, the day before she died. She told me that she had recently received a routine dose of the Prevnar 13 pneumococcal vaccine. She received the vaccine at Walgreens pharmacy and was having a reaction to the shot. During the telephone conversation, my mother told me she was not feeling well. She reported to me that she had some nausea and vomiting, fever with chills and that she was feeling extremely tired. She was also weak and having difficulty getting up. ECF No. 11-2 at 2. Special masters cannot award compensation “based on the claims of petitioner alone, unsubstantiated by medical records or by medical opinion.” 42 U.S.C. § 300aa-13(a)(1). Nothing in the medical records concerning Ms. Carl’s death substantiates Petitioner’s claims. When “the medical and other written records contradict the claims brought forth in the petition,” a special master is not arbitrary in concluding that reasonable basis for the petition did not exist. Murphy v. Secʼy of Health & Human Servs., 30 Fed. Cl. 60, 62 (1993), affʼd without opinion, 48 F.3d 1236 (Fed. Cir. 1995). The documentary evidence filed in this case does not support the claims articulated in the petition or in the affidavits. To be clear, I recognize that Petitioner’s counsel acted expeditiously, and that Petitioner dismissed this case at a relatively early stage in the litigation. However, Petitioner provided no medical record evidence linking Linda Carl’s vaccination to her death, nor was she able to submit a medical expert opinion in support of such a causal link. As such, I find that Petitioner did not have a reasonable basis to file her petition for compensation. 6 VI. Conclusion Based on the foregoing, Petitioner’s Motion for Attorneys’ Fees and Costs is DENIED. In the absence of a motion for review filed pursuant to RCFC Appendix B, the Clerk of the Court SHALL ENTER JUDGMENT in accordance with this decision.6 IT IS SO ORDERED. s/ Katherine E. Oler Katherine E. Oler Special Master 6 Pursuant to Vaccine Rule 11(a), entry of judgment can be expedited by each party filing a notice renouncing the right to seek review. 7	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/1824007/	145 B.R. 511 (1992) In re SEVENTEEN SOUTH GARMENT COMPANY, INC., a/k/a Yorkshire Pudding Company, a/k/a Koala-Way Company, Debtor. Walter L. HINSON, Trustee in Bankruptcy for the estate of Seventeen South Garment Co., Inc., Plaintiff/Appellee, v. CENTURA BANK, formerly known as People's Bank & Trust Company, Defendant/Appellant. Bankruptcy No. 90-01946-TMM, Adv. No. M-91-00320-AP, No. 92-51-CIV-5-H. United States District Court, E.D. North Carolina, Raleigh Division. September 22, 1992. 512 Walter L. Hinson, Jr., Wilson, N.C., B. Perry Morrison, Jr., Narron, Holdford, Babb, Harrison & Rhodes, Wilson, N.C., for plaintiff/appellee. J. Nicholas Ellis, Poyner & Spruill, Rocky Mount, N.C., for defendant/appellant. ORDER MALCOLM J. HOWARD, District Judge. The matter before the court the appeal of Centura Bank ("Centura" or "bank") from the judgment and order of the United States Bankruptcy Court granting the trustee's motion for summary judgment and denying Centura's motion for summary judgment. Jurisdiction over this proceeding is appropriate under 28 U.S.C. § 158. The parties have briefed their respective positions and the matter is now ripe for disposition. FACTS This dispute concerns the extent and validity of a prepetition security interest. On March 21, 1989, Seventeen South Garment Co., Inc. ("debtor"), executed a corporate resolution authorizing its relationship with People's Bank & Trust Company, now Centura Bank. In its resolution, the debtor identified itself as "17 South Garment Co., Inc.," rather than by its correct legal name: "Seventeen South Garment Co., Inc." The corporation subsequently executed a promissory note with Centura for $98,850 on February 14, 1990, secured by several security agreements. In a security agreement dated March 29, 1989, the debtor's fixtures, inventory, and equipment as specified in an attached schedule, as well as products and proceeds were pledged as collateral. However, the document lacks a "blanket" clause. Centura filed UCC-1 financing statements on April 3, 1989, with the North Carolina Secretary of State and the Pasquotank County Register of Deeds in an effort to perfect its interest. In Pasquotank County, the financing statement was indexed solely under the "odd" index. The remaining security agreements covering the corporate inventory, dated April 24, 1989, and February 14, 1990, were included in financing statements filed on March 1, 1990 with the Pasquotank County Register of Deeds, and on March 5, 1990 with the Secretary of State. In each of these security agreements and financing statements, prepared by the bank, the debtor 513 is identified as "17 South Garment Co., Inc."[1] The debtor subsequently filed a petition for relief under Chapter 7 of the Bankruptcy Code on June 19, 1990; Walter L. Hinson was appointed trustee. Mr. Hinson initiated an adversary proceeding to determine the validity of Centura's contractual interest in, and lien on, the debtor's fixtures, inventory, equipment, and products on July 12, 1991. Both parties later moved for summary judgment. The trustee disputed the existence of a contractual agreement between the corporation and Centura because of the bank's use of "17" rather than "Seventeen" to identify the debtor on the promissory note. Mr. Hinson further argued that even if a contractual relationship existed, Centura's claim is unsecured as a result of the error in the debtor's name on the UCC-1 statement. Finally, the trustee asserted that the security interest covered by the March 1989 security agreement was limited to items identified in the attached schedule absent a blanket clause. The trustee's motion was supported by Mr. Hinson's affidavit attesting to his search of the records in the Pasquotank County Register of Deeds office. In contrast, Centura argued first that the note and security agreement established a contractual relationship between itself and the debtor. Next, it contended that any error in the debtor's name on the financing statements was minor and would not therefore mislead a creditor searching for UCC-1 statements. The bank conceded the absence of the blanket clause in the security agreement but insisted that the attached schedule was broad enough to cover all of the debtor's assets. Centura's motion was supported by the affidavit of Denise W. Strathearn of the office of the Pasquotank County Register of Deeds concerning the results of a records inspection performed on July 8, 1991. At Centura's request, Ms. Strathearn searched for "Seventeen South Garment Co., Inc." Her inquiry produced several financing statements identifying the debtor by its legal name and several trade names, including "17 South Garment Co., Inc." The motions were heard by United States Bankruptcy Judge A. Thomas Small in an unrecorded hearing conducted by telephone conference call on November 15, 1991. The bankruptcy court ruled on November 29, 1991, that a contractual relationship existed between the debtor and Centura. However, Judge Small found that Centura's security interest was unperfected, reasoning that a reasonable creditor would have searched under the actual corporate name of the debtor, "Seventeen South Garment, Co., Inc.," rather than the "17 South Garment Co., Inc." The bankruptcy court implicitly discounted Ms. Strathearn's affidavit, relying on the trustee's uncontested statement that his activities in this case put the register of deeds' office on notice of the incorrectly filed financial statements. As a result, Centura's lien was avoided pursuant to 11 U.S.C. § 544(a). Although unnecessary given its findings on the insufficiency of the financing statement, the bankruptcy court further found that the security interest applied only to the items specifically listed on the schedule attached to the security agreement. This appeal followed. DISCUSSION This matter requires the court to determine the extent of Centura's security interest, the sufficiency of the financing statement, and the admissibility of evidence. These determinations are questions of law requiring de novo review. A. EXTENT OF THE SECURITY INTEREST The bank asserts that the bankruptcy court erred in ruling that its security interest applies only to the items listed on the attached schedule. It suggests that 514 "the listing simply served as an aid to identify some of the equipment that was secured by the financing statements of Centura." Centura maintains that it would be inequitable to allow the estate to recover a windfall when no other creditor loaned the debtor money secured by equipment and no other creditor was harmed. Neither the security agreement nor the equities support such a result. A natural reading of security agreement shows that the parties intended the schedule to be definitive. Had the bank intended to make the listing merely illustrative, it should have included language to that effect. Centura's failure to do so does not tip the equities in its favor against a trustee who is entitled to exploit such omissions for the benefit of unsecured creditors. B. SUFFICIENCY OF THE FINANCING STATEMENT Financing statements must meet the formal requisites of N.C.Gen.Stat. § 25-9-402 in order to be effective. A statement substantially complies with the requirements of Article 9 even though it contains minor errors which are not seriously misleading. § 25-9-402(8). The crucial determination is whether Centura's use of the debtor's numerical trade name is a minor error. A review of the statute and its accompanying comment reveals that it is not. A financing statement sufficiently shows the name of the debtor if it gives the individual, partnership, or corporate name of the debtor, whether or not it adds other trade names or names of partners. § 25-9-402(7) (emphasis added). A plain reading of the passage indicates a financing statement concerning a corporation must include at least the debtor's corporate name in order to be effective and avoid misleading creditors. R. Lord & C. Charles, North Carolina Security Interests, § 3-2(A) (1985). The authors of the Uniform Commercial Code expressly declined to base the filing system on trade names: "Subsection (7) undertakes to deal with some of the problems as to who is the debtor. In the case of individuals, it contemplates filing only in the individual name, not in a trade name. In the case of partnerships it contemplates filing in the partnership name, not in the names of any of the partners, and not in any trade names. Trade names are deemed to be too uncertain and not likely to be known to the secured party or persons searching the record, to form the basis for a filing system." However, provision is made in Section 9-403(5) for indexing in a trade name if the secured party so desires. § 25-9-402 amended official comment 7 (emphasis added). Centura offers several cases in support of its position that the failure to identify the corporation as "Seventeen South Garment" was minor error: In re Southern Supply Co., 405 F. Supp. 20 (E.D.N.C.1975); Stafford v. Admiral Credit Corporation, 280 F. Supp. 818 (M.D.N.C.1968); and Brushwood v. Citizens Bank of Perry (In re Glasco, Inc.), 642 F.2d 793 (5th Cir. Unit B April, 1981). In Southern Supply and Stafford, errors in naming the debtor on financing statements were held to be not seriously misleading. However, both are distinguishable because the trade names were sufficiently similar to the debtors' actual names that the trade name would be filed in close proximity to the legal one in the same index, giving a searcher notice despite defective identification. Southern Supply and Stafford are therefore inapplicable here since Centura's financing statement was in the "odd" index, rather than the alphabetical one where the corporation's legal name would be located. The Glasco analysis better supports the bank's position. In that case, a financing statement identifying the debtor by a trade name, "Elite Boats, Division of Glasco, Inc.," rather than its legal name "Glasco, Inc.," was held to be not seriously misleading where the debtor did business only under its trade name. Glasco, 642 F.2d at 796. Centura emphasizes that the debtor here interchangeably identified itself as "17" and "Seventeen," arguing that those who did business with the debtor would be on notice of the trade name and would 515 search both the numerical and alphabetical indices. Although Glasco has been cited with approval in other jurisdictions, the court declines to follow it because it finds the dissent more persuasive. Section 9-402 imposes no requirement that creditors search under anything other than the debtor's legal name, even if they had notice of the trade name. Id. at 798 (Tuttle, J., dissenting). This is particularly true for the bankruptcy trustee who can be seen as the ideal creditor without notice. Id. A requirement that the debtor's legal name be used on the financing statement furthers the UCC's objectives by assuring creditors that they will have adequate warning of any interest in collateral superior to their own. Pearson v. Salina Coffee House, Inc., 831 F.2d 1531, 1536 (10th Cir.1987). Giving effect to trade name filings in the absence of a filing under the debtor's legal name would burden future lenders by requiring them to anticipate the filing mistakes of other creditors. Glasco, 642 F.2d at 799. Clarity and certainty in lien perfection requirements are lost if equitable exceptions are created which permit trade names when the "equities" so dictate. Pearson, 831 F.2d at 1536. As a result, the bankruptcy court's conclusions that the filing was defective and that a reasonable searcher of the UCC-1 records would have looked only in the alphabetical index are well founded. Those findings will not be disturbed for a creditor who drew up the relevant documents and was aware of the debtor's legal name. C. CONSIDERATION OF UNSWORN STATEMENTS Centura argues that the bankruptcy court's consideration of unsworn statements by the trustee concerning his search of the Pasquotank County records constitutes reversible error. Although the hearing was unrecorded, a footnote in Judge Small's order indicates that no objection was made to Mr. Hinson's remarks. Error may not be predicated upon a ruling which admits or excludes evidence not affecting substantive rights without a timely objection. Fed.R.Evid. 103(a)(1). The failure to timely object does not preclude taking notice of plain error affecting substantive rights. Fed.R.Evid. 103(d). This court is not convinced that reversible error occurred since exclusion of the trustee's remarks would not have assured Centura of summary judgment in its favor. The finding that the security interest was unperfected by virtue of the defective financing statement was sufficient to avoid the lien absent consideration of any unsworn remarks by the trustee during the hearing. Accordingly, the judgment of the bankruptcy court avoiding the lien of Centura Bank is AFFIRMED. NOTES [1] Other statements securing inventory and accounts receivable, also prepared by the bank, identify the debtor by its legal name. These statements were properly listed in the alphabetical "Se" index and are not contested by the trustee.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/4555666/	18-3485 In re Grand Jury Proceeding 1 United States Court of Appeals 2 For the Second Circuit 3 4 5 August Term 2019 6 7 Argued: August 26, 2019 8 Decided: June 3, 2020 9 Amended: August 14, 2020 10 11 No. 18-3485 12 13 14 IN RE: GRAND JURY PROCEEDING 15 16 17 FREDERICK MARTIN OBERLANDER, 18 19 Respondent-Appellant, 20 21 RICHARD E. LERNER, 22 23 Respondent, 24 25 v. 26 27 UNITED STATES OF AMERICA, 28 29 Movant-Appellee. 30 31 32 33 Appeal from the United States District Court 34 for the Eastern District of New York 35 No. 17-mc-2242, LaShann DeArcy Hall, Judge. 1 2 Before: WINTER, POOLER, AND SULLIVAN, Circuit Judges. 3 Respondent-Appellant Frederick Oberlander challenges orders issued by 4 the district court (LaShann DeArcy Hall, J.) denying his motion to quash various 5 grand jury subpoenas and directing him to comply with the subpoenas on pain of 6 coercive monetary sanctions. Oberlander argues that the district court lacked 7 jurisdiction to enforce those subpoenas because they were either issued by the 8 government without a sitting grand jury or were enforced only after the issuing 9 grand jury had expired. In addition, Oberlander argues that the subpoenas were 10 overbroad, issued for an improper purpose, and infringed upon his First and Fifth 11 Amendment rights. We hold that (1) the district court lacked jurisdiction to 12 enforce a subpoena issued without a sitting grand jury; (2) the district court 13 retained jurisdiction to oversee a subpoena involving the same subject matter that 14 was subsequently issued by a newly impaneled grand jury; and (3) the district 15 court ceased to have jurisdiction to enforce the validly issued subpoena after the 16 issuing grand jury’s term expired. Nevertheless, because yet another grand jury 17 has been impaneled and has issued an identical subpoena, we have jurisdiction to 18 reach the merits of Oberlander’s motion to quash the subpoena and find that the 19 subpoena was neither overbroad nor issued with an improper purpose, and that 20 it did not infringe upon Oberlander’s First or Fifth Amendment rights. 21 22 VACATED IN PART; AFFIRMED IN PART AND REMANDED. 23 24 FREDERICK M. OBERLANDER, ESQ., pro se, Montauk, 25 New York. 26 27 RICHARD D. BELLISS (Stephen C. Green, on the brief) 28 Assistant United States Attorneys, for Grant C. 29 Jaquith, United States Attorney for the Northern 30 District of New York, Albany, New York, for 31 Movant-Appellee United States of America. 32 2 1 RICHARD J. SULLIVAN, Circuit Judge: 2 Respondent-Appellant Frederick Oberlander challenges orders issued by 3 the district court (LaShann DeArcy Hall, Judge) denying his motion to quash 4 various grand jury subpoenas and directing him to comply with the subpoenas on 5 pain of coercive monetary sanctions. Oberlander argues that the district court 6 lacked jurisdiction to enforce those subpoenas because they were either issued by 7 the government without a sitting grand jury or were enforced only after the 8 issuing grand jury had expired. In addition, Oberlander argues that the subpoenas 9 were overbroad, issued for an improper purpose, and infringed upon his First and 10 Fifth Amendment rights. 11 We VACATE IN PART, AFFIRM IN PART, and REMAND, holding that 12 (1) the district court lacked jurisdiction to enforce a subpoena issued without a 13 sitting grand jury; (2) the district court retained jurisdiction to oversee a subpoena 14 involving the same subject matter that was subsequently issued by a newly 15 impaneled grand jury; and (3) the district court ceased to have jurisdiction to 16 enforce the validly issued subpoena after the issuing grand jury’s term expired. 17 Nevertheless, because yet another grand jury has been impaneled and has issued 18 an identical subpoena, we have jurisdiction to reach the merits of Oberlander’s 3 1 motion to quash and find that the subpoena was neither overbroad nor issued with 2 an improper purpose, and that it did not infringe upon Oberlander’s First or Fifth 3 Amendment rights. 4 I. Background 5 A. Prior Proceedings 6 In 1998, Felix Sater pleaded guilty to participating in a “pump and dump” 7 securities fraud scheme as a part of a racketeering enterprise involving the La Cosa 8 Nostra organized crime families. Estate of Gottdiener v. Sater, 35 F. Supp. 3d 386, 9 391 (S.D.N.Y. 2014); see also Information at 10, United States v. Sater, No. 98-cr-1101 10 (ILG) (E.D.N.Y. Dec. 10, 1998), ECF No. 6. Over the next decade, he secretly 11 cooperated with the government in an undercover capacity, providing “valuable 12 foreign intelligence as well as information concerning some of the most elusive 13 and dangerous criminals of interest to U.S. law enforcement.” United States v. 14 Sater, No. 98-cr-1101 (ILG), 2019 WL 3288389, at 1 (E.D.N.Y. July 22, 2019). 15 Although Sater’s criminal proceedings were finally terminated when he was 16 sentenced in 2009, the fact of his cooperation remained sealed until it was 17 inadvertently disclosed by the Office of the Clerk of Court in August 2012. See In 18 re Applications to Unseal 98 CR 1101(ILG), 568 F. App’x 68, 69 (2d Cir. 2014); see also 4 1 Sater, 2019 WL 3288389, at 1 (discussing Sater’s cooperation as a matter of public 2 record). 3 Between 2010 and 2013, on the heels of Sater’s sentencing, Oberlander filed 4 a series of lawsuits seeking compensation on behalf of clients who alleged that 5 Sater had defrauded them. See Notice of Removal, Kriss v. BayRock Grp. LLC, 6 No. 13-cv-3905 (LGS) (S.D.N.Y. June 7, 2013), ECF No. 1; Complaint, Estate of 7 Gottdiener v. Sater, No. 13-cv-01824 (LGS) (S.D.N.Y. March 18, 2013), ECF No. 1; 8 Complaint, Kriss v. BayRock Grp. LLC, No. 10-cv-3959 (LGS) (S.D.N.Y. May 10, 9 2010), ECF No. 1. As part of those lawsuits, Oberlander sought to publicly disclose 10 information about Sater’s cooperation with the government, even going so far as 11 to attach sealed materials to the complaints as exhibits. See Roe v. United States, 428 12 F. App’x 60, 63–64 (2d Cir. 2011). Ultimately, this Court enjoined Oberlander from 13 publicly disclosing any sealed information and directed the Chief Judge of the 14 Eastern District of New York to appoint a special master to oversee compliance 15 with the relevant sealing orders. Roe v. United States, 414 F. App’x 327, 329 (2d Cir. 16 2011); see also In re Applications to Unseal 98 CR 1101(ILG), 568 F. App’x at 70 17 (affirming sealing orders); Roe, 428 F. App’x at 68 (affirming injunction). 5 1 In August 2012, Sater commenced a civil contempt proceeding against 2 Oberlander, alleging that Oberlander had intentionally violated this Court’s 3 disclosure injunction. See Motion, In re Motion for Civil Contempt by John Doe, 4 No. 12-mc-557 (PKC) (E.D.N.Y. Aug. 22, 2012), ECF No. 1. In March 2015, Judge 5 Cogan, then serving as special master, issued an order directing Oberlander to 6 show cause as to why he had not violated the sealing orders and this Court’s 7 orders by repeatedly disclosing sealed documents and other information between 8 February 2011 and January 2015. See id., ECF No. 97. Four months later, Judge 9 Cogan referred the matter to the United States Attorney for the Eastern District of 10 New York for a criminal investigation. See id., ECF. No. 117. The United States 11 Attorney’s Office for the Eastern District of New York subsequently recused itself 12 and referred the investigation to the United States Attorney for the Northern 13 District of New York. 14 B. Grand Jury and District Court Proceedings 15 In April 2016, following Judge Cogan’s referral, a grand jury was impaneled 16 in the Eastern District of New York (the “First Grand Jury”) to investigate 17 Oberlander’s conduct with respect to the sealing orders. Two months later, in 18 June 2016, the First Grand Jury issued the first of at least four subpoenas 6 1 requesting documents from Oberlander relating to his communications with 2 reporters. Oberlander refused to comply with the subpoena, and the First Grand 3 Jury’s term expired on December 14, 2016. 4 Nevertheless, over four months later, the government, apparently unaware 5 that the First Grand Jury had expired, served Oberlander with another grand jury 6 subpoena (the “April 2017 Subpoena”) in connection with the same investigation. 7 This subpoena, dated April 3, 2017, was directed to the custodian of records for 8 Oberlander’s law firm and requested the same records as the first subpoena, as 9 well as the custodian’s testimony. Neither Oberlander nor a different records 10 custodian appeared to give testimony, and no records were produced. 11 Meanwhile, on April 19, 2017, a new grand jury was impaneled (the “Second 12 Grand Jury”) to investigate the same conduct: Oberlander’s mishandling of sealed 13 documents and his violation of court-issued sealing orders. 14 In August 2017, the government filed a motion to compel Oberlander to 15 comply with the April 2017 Subpoena. The district court granted the motion a 16 week later. After eight months and at least nine extensions of time, Oberlander 17 filed a pro se motion to quash the subpoena on May 7, 2018. 7 1 On June 6, 2018, the district court denied Oberlander’s motion to quash but 2 directed the government to reissue the April 2017 Subpoena with minor 3 amendments not relevant here. The court further ordered Oberlander to produce 4 the documents demanded by the soon-to-be-reissued subpoena within a month 5 and warned that failure to comply would “result in sanctions, including the 6 imposition of coercive fines or imprisonment pending compliance.” Gov’t App’x 7 at 133. 8 On June 12, 2018, in accordance with the district court’s direction, the 9 Second Grand Jury issued a revised subpoena (the “June 2018 Subpoena”), which, 10 like the prior two subpoenas, sought records of communications between 11 Oberlander and eight news reporters “involving any matters about Felix Sater” 12 and others occurring between January 11, 2011 and February 1, 2015. Gov’t App’x 13 at 136. The June 2018 Subpoena also required the custodian of records to testify 14 before the Second Grand Jury. 15 On June 22, 2018, Oberlander filed a motion for reconsideration of his 16 motion to quash the April 2017 Subpoena and to stay enforcement of the district 8 1 court’s June 6 order, which the district court denied on June 27, 2018. 1 In so doing, 2 the district court again warned Oberlander that his continued failure to produce 3 responsive documents would result in coercive sanctions. 4 On July 3, 2018, one day before the production deadline set by the district 5 court’s June 6 order, Oberlander produced responsive records for the period 6 beginning on January 9, 2013 – the date on which Oberlander had incorporated his 7 law practice – and continuing through the June 2018 Subpoena’s end date. 8 Oberlander subsequently submitted to the district court additional records 9 covering the period from the subpoena’s start date to January 8, 2013 – a period in 10 which Oberlander operated his law firm as an unincorporated sole proprietorship. 11 Relying on that fact, Oberlander, ostensibly moving to quash the June 2018 12 Subpoena, requested that the court review those records in camera to determine 13 whether they constituted personal records protected by the Fifth Amendment’s 14 “act of production” privilege – an argument that he had already raised, 15 unsuccessfully, in his motion to quash the April 2017 Subpoena. Predictably, on 1Though Oberlander did not formally style this as a motion to quash the June 2018 Subpoena, that was its practical effect. The June 2018 Subpoena was substantively identical to the April 2017 Subpoena, and a decision to quash the April 2017 Subpoena would apply with equal force to the June 2018 Subpoena. Moreover, as the June 2018 Subpoena was then the operative subpoena in the investigation, Oberlander had no need to quash the old April 2017 Subpoena. 9 1 September 25, 2018, the district court, treating Oberlander’s request as “an 2 additional baseless motion for reconsideration,” determined that the records were 3 not protected by the Fifth Amendment and ordered Oberlander to produce them 4 “to the government” within six days. Gov’t App’x at 144, 146. 5 Despite this order, Oberlander still had not produced the withheld 6 documents by October 17, 2018 – the date on which the Second Grand Jury, which 7 issued the June 2018 Subpoena, expired. Five days later, without an impaneled 8 grand jury, the government filed a motion to compel Oberlander to produce all 9 withheld documents as required by the district court’s orders and the June 2018 10 Subpoena. On October 23, 2018, the district court ordered Oberlander to produce 11 any remaining responsive documents by October 31, 2018 or be subject to civil 12 contempt sanctions in the form of a $1,000 daily fine until he complied. After 13 Oberlander claimed that he received late notice of that order, the district court 14 issued yet another order, dated November 8, 2018, that temporarily stayed the 15 October 23 order and directed Oberlander to produce the subpoenaed documents 16 within seven days of receiving the court’s November 8 order, again with a $1,000 17 daily fine to follow for noncompliance thereafter. As before, the deadline imposed 10 1 by the district court came and went without Oberlander producing any 2 documents. 2 3 On November 16, 2018, Oberlander timely appealed from the district court’s 4 November 8, 2018 order. Doc. No. 1. He also challenges the district court’s 5 (i) June 6, 2018 order denying his motion to quash the April 2017 Subpoena; 6 (ii) June 27, 2018 and September 25, 2018 orders denying his motions for 7 reconsideration of his motion to quash; and (iii) October 23, 2018 order directing 8 compliance with the June 2018 Subpoena on pain of coercive monetary sanctions. 9 This Court granted Oberlander’s motion for a stay of monetary sanctions pending 10 appeal. Doc. No. 34. 11 II. Appellate Jurisdiction and Standard of Review 12 We have jurisdiction over the district court’s November 8, 2018 final order 13 imposing contempt sanctions, and the orders preceding it, under 28 U.S.C. § 1291. 14 See In re Air Crash at Belle Harbor, 490 F.3d 99, 104–05 (2d Cir. 2007); Anobile v. 15 Pelligrino, 303 F.3d 107, 115 (2d Cir. 2002) (“Generally, . . . this Court interprets an 16 appeal from a specific order disposing of the case as an appeal from the final 2On November 29, 2018, a newly impaneled grand jury, which was still sitting as of February 19, 2019, issued a new subpoena to Oberlander. The new subpoena is identical in all material respects to the June 2018 Subpoena. Though the government moved to compel Oberlander to comply with this new subpoena, the district court has not yet ruled on that motion. 11 1 judgment, which incorporates all previous interlocutory judgments in that case 2 and permits their review on appeal.”). Insofar as Oberlander challenges our 3 jurisdiction and that of the district court, we may consider those issues as well. See 4 Kuhali v. Reno, 266 F.3d 93, 100 (2d Cir. 2001) (acknowledging that all Article III 5 courts possess the “inherent jurisdiction . . . to determine their jurisdiction”). 6 “The standard of review for determinations regarding subject-matter 7 jurisdiction is clear error for factual findings, and de novo for the legal conclusion 8 as to whether subject[-]matter jurisdiction exists.” Cohen v. Postal Holdings, LLC, 9 873 F.3d 394, 398 (2d Cir. 2017) (quoting Lyndonville Sav. Bank & Tr. Co. v. Lussier, 10 211 F.3d 697, 701 (2d Cir. 2000)). 11 III. Discussion 12 Oberlander challenges the district court’s sanctions orders and its refusal to 13 quash the subpoenas on various grounds. He argues that the district court: 14 (1) ceased to have subject-matter jurisdiction over the case once the government 15 served the April 2017 Subpoena without a sitting grand jury; (2) lacked the power 16 to issue coercive sanctions to enforce compliance with the April 2017 and June 2018 17 Subpoenas because the issuing grand juries had expired by the time the sanctions 18 orders had issued; and (3) erred in not quashing the April 2017 and June 2018 12 1 Subpoenas on the grounds that they were overbroad and issued in bad faith, 2 unduly burdened his First Amendment rights, and compelled him to produce 3 certain documents in violation of his Fifth Amendment “act of production” 4 privilege. We address each of these issues in turn. 5 A. Validity of April 2017 Subpoena and Jurisdiction Over Later 6 Proceedings 7 Oberlander argues that the district court lacked jurisdiction over all 8 proceedings relating to the April 2017 and June 2018 Subpoenas because the 9 April 2017 Subpoena – which was issued without a sitting grand jury – was “never 10 more than a scrap of paper.” Oberlander’s Br. at 30. We therefore must determine 11 whether the April 2017 Subpoena was invalid when issued and, if so, whether that 12 fact somehow stripped the district court of jurisdiction to consider any subsequent 13 subpoenas issued by later grand juries containing the same information requests 14 or involving the same underlying conduct. 15 On the first point, we agree with Oberlander. The April 2017 Subpoena was 16 invalid because it was served by the government in the name of an expired grand 17 jury. That the Second Grand Jury was subsequently impaneled before the 18 subpoena’s April 19 return date does not alter this conclusion. 13 1 It is well settled that more than one grand jury may investigate the same 2 matter. See United States v. Thompson, 251 U.S. 407, 413–15 (1920); see also United 3 States v. Halper, 590 F.2d 422, 433 n.16 (2d Cir. 1978). Nevertheless, each grand 4 jury’s investigation is “separate and independent” from its predecessor’s, since an 5 investigation “terminates with the grand jury [that] undertakes it.” Loubriel v. 6 United States, 9 F.2d 807, 809 (2d Cir. 1926) (Learned Hand, J.). 3 On that basis, a 7 subpoena, which is merely an investigative tool, also terminates with the 8 investigating grand jury that issued it. More to the point, the duty imposed by a 9 subpoena to produce documents to, or to testify before, a specific grand jury ceases 10 once that grand jury’s term expires. See id. (“When that [grand jury] adjourned, 11 Loubriel was under no further duty to testify [pursuant to the subpoena] . . . .”). 12 We have never wavered from this long-standing precedent, and at least one other 13 circuit has agreed that each new grand jury must issue its own subpoena. See In 14 re Grand Jury Proceedings (“NITHPO”), 744 F.3d 211, 217–18 (1st Cir. 2014) 15 (reasoning that to hold otherwise “would render the grand jury subpoena process 16 all but meaningless” and noting that there is “no great administrative difficulty in 3 That Loubriel is nearly a century old is neither here nor there; it may be old, but it is “old precedent, and we are bound to follow [it].” See Vasquez v. GMD Shipyard Corp., 582 F.3d 293, 299 (2d Cir. 2009) (internal quotation marks omitted) (treating as binding opinions issued in 1903 and 1909). 14 1 requiring, as a precondition to the use of coercive contempt power, the issuance of 2 a new subpoena for each new grand jury”). 4 3 Accordingly, the April 2017 Subpoena was invalid from its inception. The 4 subpoena was labeled “4/4/2016[],” the date on which the First Grand Jury was 5 impaneled, reflecting that the subpoena concerned the First Grand Jury’s 6 investigation. Gov’t App’x at 15–17. But by April 2017, when the subpoena was 7 issued, the grand jury – and its investigation – had long since terminated. The 8 subpoena was therefore a nullity, since it required Oberlander to produce 9 documents to and appear before a grand jury that was no longer impaneled, in 10 connection with an investigation that had expired in December 2016. Compliance 11 with such a subpoena was obviously impossible, Loubriel, 9 F.2d at 809, and the 12 district court lacked the power to compel the impossible through coercive 13 sanctions. 4 We note, however, that two other circuits have held to the contrary. See In re Sealed Case, 223 F.3d 775, 778 (D.C. Cir. 2000) (“Appellant has identified no prejudice arising from enforcement of a subpoena where the originally issuing grand jury has expired and another has indisputably carried the investigation forward.”); In re Grand Jury Proceedings, 658 F.2d 782, 783–84 (10th Cir. 1981) (reasoning that “to hold that a second subpoena is required would simply result in a complete waste of judicial time” and limiting the holding in Loubriel to subpoenas calling for testimony before a grand jury). Nevertheless, we find the analysis provided by Loubriel and NITHPO to be more compelling. 15 1 But that finding does not end our inquiry. Even though the April 2017 2 Subpoena was invalid when issued, the district court could clearly enforce the June 3 2018 Subpoena, which was properly issued by the then-impaneled Second Grand 4 Jury. See 28 U.S.C. § 1826(a) (granting district courts the authority to sanction a 5 recalcitrant witness “in any proceeding before or ancillary to any . . . grand jury”); 6 In re Doe, 860 F.2d 40, 49 (2d Cir. 1988) (explaining that district courts have 7 “inherent supervisory power” to enforce grand jury subpoenas); cf. Cosme v. IRS, 8 708 F. Supp. 45, 47 (E.D.N.Y. 1989) (holding that the district court had jurisdiction 9 over a summons even though it lacked jurisdiction over two related summonses, 10 which were issued to entities outside of the district). We are aware of no authority 11 suggesting that the issuance of an invalid subpoena automatically strips the court 12 of subject-matter jurisdiction to enforce subsequent subpoenas issued by a 13 properly impaneled and still-sitting grand jury investigating the same alleged 14 misconduct. To the contrary, in other contexts, we have recognized that even “if 15 a jurisdictional defect exists at some time prior to a district court’s entry of 16 judgment, the court’s judgment is still valid if the jurisdictional defect is cured 17 before final judgment is entered.” Brown v. Eli Lilly & Co., 654 F.3d 347, 356 (2d 18 Cir. 2011); see also Hallingby v. Hallingby, 574 F.3d 51, 56 (2d Cir. 2009) (“[T]he 16 1 critical issue [is] whether the district court had subject matter jurisdiction at any 2 time before it rendered judgment.” (quoting Briarpatch Ltd. v. Phoenix Pictures, Inc., 3 373 F.3d 296, 301 (2d Cir. 2004)). We therefore have little trouble concluding that 4 the district court had authority to enforce the June 2018 Subpoena while the 5 Second Grand Jury, which issued it, was still impaneled. 6 B. Power to Issue Coercive Sanctions to Compel Compliance with a 7 Subpoena After the Issuing Grand Jury Has Expired 8 Oberlander next argues that even if the June 2018 Subpoena was validly 9 issued, the district court’s October 23, 2018 and November 8, 2018 sanctions orders 10 were invalid because they were issued after the Second Grand Jury had already 11 expired. Because “the law does not compel the impossible,” NITHPO, 744 F.3d 12 at 212, we agree. 13 As an initial matter, the district court had jurisdiction to enforce the 14 June 2018 Subpoena when it issued its June 27, 2018 and September 25, 2018 15 orders. At that time, the subpoena, having been validly issued by a still-sitting 16 grand jury, was enforceable. And had the district court issued coercive sanctions 17 at that time – or at any point before the Second Grand Jury expired on October 17, 18 2018 – we would have no hesitation in upholding that order. But it did not. The 17 1 district court instead waited until after the Second Grand Jury’s term expired to 2 finally hold Oberlander in contempt. 3 Once the issuing grand jury expired, Oberlander’s duty to comply with the 4 June 2018 Subpoena ceased. See Loubriel, 9 F.2d at 809. And, as we previously held 5 in Loubriel, Oberlander cannot be “compelled to discharge a duty which ha[s] 6 ended.” Id. To hold otherwise would place Oberlander in the untenable position 7 of being subject to civil sanctions without the ability to purge himself of contempt. 8 See Shillitani v. United States, 384 U.S. 364, 371 (1966) (“Where the grand jury has 9 been finally discharged, a contumacious witness can no longer be confined since 10 he then has no further opportunity to purge himself of contempt.”). 11 The government attempts to sidestep this logic, arguing that Oberlander can 12 still purge himself of contempt because (i) the district court ordered Oberlander to 13 produce documents directly to the government, not the grand jury and (ii) a 14 successor grand jury has since been impaneled to continue the investigation. We 15 disagree. 16 First, the government does not identify any authority for the district court’s 17 orders except the expired June 2018 Subpoena. And, as we held in Loubriel, any 18 order to produce evidence pursuant to an expired grand jury’s subpoena is “void.” 18 1 9 F.2d at 809; see also United States v. First Nat’l City Bank, 396 F.2d 897, 900 n.9 (2d 2 Cir. 1968) (“[T]he punishment [of civil contempt] c[annot] extend beyond the 3 expiration of the life of the Grand Jury.”). The fact that the district court ordered 4 Oberlander to produce the documents to the government directly is of no moment, 5 since the government is not authorized to stand in the shoes of the grand jury. To 6 hold otherwise would effectively overturn Loubriel and, more importantly, reduce 7 the grand jury to a quaint fiction. Cf. Branzburg v. Hayes, 408 U.S. 665, 687 (1972) 8 (“Grand jury proceedings are constitutionally mandated for the institution of 9 federal criminal prosecutions for capital or other serious crimes, and its 10 constitutional prerogatives are rooted in long centuries of Anglo-American 11 history.” (internal quotation marks omitted)); id. at 690 (“[T]he grand jury plays 12 an important, constitutionally mandated role . . . .”); Trump v. Vance, 941 F.3d 631, 13 643–44 (2d Cir. 2019) (“[T]he grand jury has a central role in our system of 14 federalism . . . [and] [w]e are thus hesitant to interfere with the ancient role of the 15 grand jury.” (internal quotation marks omitted)). 16 Second, as discussed above, a grand jury cannot merely pick up an 17 investigation from where its predecessor left off. Loubriel, 9 F.2d at 809. Each is a 18 separate entity conducting its own investigation. Just as evidence and testimony 19 1 presented to one grand jury must be re-presented to a new grand jury, see, e.g., In 2 re Grand Jury Matter #3, 847 F.3d 157, 160 (3d Cir. 2017) (noting that evidence 3 presented to an initial grand jury was re-presented to a subsequent grand jury 4 before it issued a superseding indictment); see also United States v. Guillen, No. 17- 5 cr-512 (KMW), 2018 WL 5831318, at 7 (S.D.N.Y. Nov. 7, 2018) (same); United States 6 v. Allen, No. 09-cr-329 (RJA), 2014 WL 1745933, at 2 (W.D.N.Y. Apr. 30, 2014) 7 (same), so too must the new grand jury issue new investigative subpoenas to 8 obtain evidence previously sought by but not produced to an earlier grand jury. 9 To be sure, requiring each subsequent grand jury to issue nearly identical 10 subpoenas may result in more paperwork for the government. But, like the First 11 Circuit, “we see no great administrative difficulty in requiring, as a precondition 12 to the use of coercive contempt power, the issuance of a new subpoena for each 13 new grand jury.” NITHPO, 744 F.3d at 218. And it certainly will not require much 14 effort on the part of the government to stay abreast of the expiration dates of the 15 grand juries charged with investigating serious and potentially criminal conduct. 16 Indeed, federal law allows for grand jury terms to be extended beyond 18 months 17 when such “an extension is in the public interest.” Fed. R. Crim. P. 6(g) (limiting 18 extensions to “no more than 6 months, except as otherwise provided by statute”); 20 1 see also 18 U.S.C. § 3331(a) (allowing for the term of certain “special grand jur[ies]” 2 to be extended up to 36 months when “the district court determines [that] the 3 business of the grand jury has not been completed”). 4 Accordingly, the district court’s authority to enforce the June 2018 Subpoena 5 ceased when the issuing grand jury’s term expired on October 17, 2018. We 6 therefore vacate the district court’s October 23, 2018 and November 8, 2018 7 sanctions orders for lack of jurisdiction. 5 8 That is not to say that the district court stands powerless in the face of 9 Oberlander’s recalcitrance and repeated violations of court orders. On remand, 10 the district court is certainly free to consider whether to initiate criminal contempt 11 proceedings against Oberlander. 6 See Fed. R. Crim. P. 42 (providing courts with 12 the power to initiate criminal contempt prosecutions); see also Fed. R. Crim. P. 17(g) 13 (“The court . . . may hold in contempt a witness who, without adequate excuse, 5 As we vacate the district court’s sanctions order, we do not reach Oberlander’s alternative arguments that the sanctions were improper because he was not granted a hearing, that the record did not demonstrate that the amount imposed was reasonable, or that he was denied his right to counsel with respect to the sanctions order. 6 The one-year statute of limitations prescribed by 18 U.S.C. § 3285 applies only to contempt proceedings “within [18 U.S.C. §] 402.” Because Oberlander’s contempt “was committed in disobedience of a court order entered in an action prosecuted on behalf of the United States,” § 402 is inapplicable. See United States v. Woodard, 675 F.3d 1147, 1150–51 (8th Cir. 2012) (alterations omitted) (quoting United States v. Miller, 588 F.2d 1256, 1262 (9th Cir. 1978)). 21 1 disobeys a subpoena issued by a federal court in that district.”). Whereas civil 2 contempt seeks to compel compliance with the court’s orders for the benefit of the 3 complainant, the purpose of criminal contempt “is punitive, to vindicate the 4 authority of the court.” In re Weiss, 703 F.2d 653, 661 (2d Cir. 1983) (quoting 5 Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 441 (1911)); see also 18 U.S.C. § 401 6 (providing that a court shall have the power to punish “contempt of its authority”). 7 As explained above, the district court here could not hold Oberlander in civil 8 contempt because he would be unable to purge himself of that contempt. But that 9 inability is irrelevant in a criminal contempt action, which is punitive in nature. 10 See In re Grand Jury Proceedings, 871 F.2d 156, 162 (1st Cir. 1989) (recognizing that 11 “the court always has available the sanction of criminal contempt” where a witness 12 has not complied with an expired grand jury’s subpoena); cf. Shillitani, 384 U.S. at 13 371 (“Having sought to deal only with civil contempt, the District Courts lacked 14 authority to imprison petitioners for a period longer than the term of the grand 15 jury.” (emphasis added)). 16 C. Motion to Quash 17 Our decision that the June 2018 Subpoena is now unenforceable does not 18 render Oberlander’s motion to quash moot. We have jurisdiction to review the 22 1 issues raised in that motion because this dispute is “capable of repetition, yet 2 evading review.” United States. v. Juvenile Male, 564 U.S. 932, 938 (2011) (internal 3 quotation marks omitted). 4 This exception to the mootness doctrine applies “where (1) the challenged 5 action is in its duration too short to be fully litigated prior to cessation or 6 expiration, and (2) there is a reasonable expectation that the same complaining 7 party will be subject to the same action again.” Id. (internal quotation marks and 8 alterations omitted). Both requirements are met here. As the history of this 9 dispute demonstrates, the relatively short duration of the grand jury has made it 10 practically impossible to fully litigate Oberlander’s challenges to the subpoena. 11 See In re Grand Jury Subpoena Served Upon Doe, 781 F.2d 238, 243 (2d Cir. 1986) (en 12 banc) (“Grand jury investigations must proceed expeditiously. The length of time 13 required for appellate review [of a motion to quash a subpoena] often is 14 protracted.”). Moreover, a successor grand jury has already initiated a similar 15 investigation and has issued a new subpoena seeking the same documents and 16 testimony as the June 2018 Subpoena. And, as noted above, even if that grand jury 17 has itself expired, the district court may well choose to institute criminal contempt 18 proceedings against Oberlander, which would no doubt raise similar issues 23 1 concerning the June 2018 Subpoena’s validity. It is therefore apparent that this 2 dispute is alive and well. See id. (holding that a motion to quash a grand jury 3 subpoena falls within the “capable of repetition yet evades review” exception to 4 mootness (internal quotation marks omitted)); see also NITHPO, 744 F.3d at 218–19 5 (holding that a challenge to a subpoena is not moot where a successor grand jury 6 is investigating the same conduct). Accordingly, there is no bar to our 7 consideration of Oberlander’s motion to quash on the merits. 8 Oberlander argues that the district court abused its discretion in denying his 9 motion to quash the June 2018 Subpoena because the subpoena (i) was overbroad 10 and issued in bad faith; (ii) improperly burdened his First Amendment rights; and 11 (iii) called for the production of incriminating personal records in violation of the 12 Fifth Amendment. We disagree. 13 1. Overbreadth & Bad Faith 14 Oberlander’s contention that the June 2018 Subpoena was invalid because it 15 was overbroad and issued in bad faith fails for a number of reasons. 16 First, the district court did not abuse its discretion in finding that the 17 June 2018 Subpoena was reasonable in scope. Because the grand jury’s function 18 “is to inquire into all information that might possibly bear on its investigation until 19 it has identified an offense or has satisfied itself that none has occurred,” the grand 24 1 jury necessarily “paints with a broad brush.” United States v. R. Enters., Inc., 498 2 U.S. 292, 297 (1991). Thus, a grand jury subpoena is unreasonably broad only if 3 “there is no reasonable possibility that the category of materials the [g]overnment 4 seeks will produce information relevant to the general subject of the grand jury’s 5 investigation.” Id. at 301. Oberlander, as the party seeking to quash the subpoena, 6 bears the heavy burden of making that showing. In re Liberatore, 574 F.2d 78, 83 7 (2d Cir. 1978) (“[T]he party seeking to quash a subpoena must carry the burden of 8 showing that the information sought bears no conceivable relevancy to any 9 legitimate object of investigation by the federal grand jury.” (internal quotation 10 marks omitted)). 11 Oberlander argues that he has met this burden because the subpoena 12 demanded the production of records for all communications between Oberlander 13 and eight reporters that in any way concerned the individuals and entities 14 associated with the litigations underlying the sealing orders. According to 15 Oberlander, the subpoena instead should have been limited to only those 16 communications concerning information subject to the sealing orders. But given 17 the “broad brush” with which grand juries paint, the subpoena was sufficiently 18 related to Judge Cogan’s criminal referral. See R. Enters., 498 U.S. at 297. This is 25 1 especially true in light of the grand jury’s authority to “investigate merely on 2 suspicion that the law is being violated, or even just because it wants assurance 3 that it is not.” United States v. Morton Salt Co., 338 U.S. 632, 642–43 (1950). 4 Second, the district court also reasonably concluded that the subpoena was 5 not issued in bad faith or otherwise used for an improper purpose. “A grand jury 6 subpoena is presumed to have a proper purpose,” and the party challenging the 7 subpoena “bears the burden of showing that the grand jury has exceeded its legal 8 powers.” United States v. Salameh, 152 F.3d 88, 109 (2d Cir. 1998) (citing R. Enters., 9 498 US. at 300–01). To do so, that party “must present ‘particularized proof’ of an 10 improper purpose to overcome the presumption of propriety of the grand jury 11 subpoena.” Id. (quoting United States v. Mechanik, 475 U.S. 66, 75 (1986)). 12 Oberlander’s arguments fall well short of that mark. Most of his allegations 13 predate the criminal referral and concern the conduct of the referring court, rather 14 than the government or the grand jury. For example, Oberlander suggests – 15 without any support – that Judge Cogan was biased against him. His remaining 16 allegations fare no better. For instance, Oberlander bemoans the length of the 17 investigation, but fails to explain why the investigation’s timeline was 18 unreasonable or how it offers “particularized proof” of bad faith. See Salameh, 152 26 1 F.3d at 109 (internal quotation marks omitted). Oberlander also suggests that the 2 government intentionally sought to enforce an invalid subpoena in initiating this 3 action, and then intentionally concealed that fact. But that claim is at best 4 speculative. And although Oberlander asserts that the conduct under 5 investigation did not violate valid court orders, even if true, that would not render 6 the investigation improper. See, e.g., United States v. Williams, 504 U.S. 36, 48 (1992) 7 (noting that a grand jury “need not identify the offender it suspects, or even the 8 precise nature of the offense it is investigating” (internal quotation marks 9 omitted)); R. Enters., 498 U.S. at 297. 10 2. First Amendment Burdening 11 Oberlander next argues that the district court erred in finding that the 12 subpoenas did not burden his First Amendment rights, and that it should have 13 applied “a heightened scrutiny, compelling interest test” to the subpoena, because 14 it sought documents related to Oberlander’s communications with the press. 15 Oberlander’s Br. at 31. But a potential witness is not excused from compliance 16 with a grand jury subpoena merely because the subpoena concerns the witness’s 17 communications with reporters. See Branzburg, 408 U.S. at 695, 700. And this 18 Court previously rejected Oberlander’s First Amendment challenges to the 27 1 underlying sealing orders and injunctions. See, e.g., Roe, 428 F. App’x at 66–67. 2 Oberlander’s First Amendment arguments are thus meritless. 3 3. Fifth Amendment Act of Production Privilege 4 Lastly, Oberlander argues that the district court abused its discretion in 5 refusing to permit him to withhold certain documents on Fifth Amendment 6 grounds. In particular, Oberlander tells us that he is entitled to assert a Fifth 7 Amendment privilege with respect to all documents predating the January 2013 8 incorporation of his law firm. The district court concluded that those documents 9 were created in Oberlander’s professional capacity and were therefore ineligible 10 for protection under the Fifth Amendment. We agree with the district court’s 11 ultimate conclusion, though we affirm on slightly different grounds. See Thyroff v. 12 Nationwide Mut. Ins. Co., 460 F.3d 400, 405 (2d Cir. 2006) (“[W]e are free to affirm a 13 decision on any grounds supported in the record, even if it is not one on which the 14 trial court relied.”). 15 The Fifth Amendment guarantees that no individual “shall be compelled in 16 any criminal case to be a witness against himself.” U.S. Const. amend. V; see also 17 Lefkowitz v. Turley, 414 U.S. 70, 77 (1973) (acknowledging that the Fifth 18 Amendment may be invoked outside of criminal proceedings). Although that 19 guarantee plainly applies to statements, its reach is not so limited – it applies to 28 1 any “compelled incriminating communications . . . that are ‘testimonial’ in 2 character.” United States v. Hubbell, 530 U.S. 27, 34 (2000). “Because the act of 3 producing documents can be both incriminating and testimonial . . . a subpoenaed 4 party may be able to resist production on Fifth Amendment grounds.” In re Grand 5 Jury Subpoena Issued June 18, 2009 (“ASC”), 593 F.3d 155, 157 (2d Cir. 2010); see also 6 Fisher v. United States, 425 U.S. 391, 410 (1976) (acknowledging that the Fifth 7 Amendment guarantees an act-of-production privilege). 8 It is well understood, however, that an individual may not assert a Fifth 9 Amendment privilege on behalf of a “collective entity” – i.e., “an[y] organization 10 which is recognized as an independent entity apart from its individual members,” 11 such as a corporation or partnership. Bellis v. United States, 417 U.S. 85, 92 (1974); 12 see also Braswell v. United States, 487 U.S. 99, 104–10 (1988); ASC, 593 F.3d at 157–59. 13 This “collective entity” exception applies to any testimonial privilege under the 14 Fifth Amendment, including the act-of-production privilege. See Braswell, 487 U.S. 15 at 109–10 (“We cannot agree . . . that [Fisher] rendered the collective entity rule 16 obsolete.”). Thus, when a witness refuses to produce documents on Fifth 17 Amendment grounds, the court must distinguish between those documents that 29 1 are personal in nature, and therefore may be withheld, and those that are corporate 2 in nature, and therefore fall within the “collective entity” exception. 3 Although drawing this distinction is not always an easy task, we have 4 developed a non-exhaustive multi-factor balancing test under which district 5 courts are to consider: 6 [W]ho prepared the document, the nature of its contents, 7 its purpose or use, who maintained possession and who 8 had access to it, whether the corporation required its 9 preparation, and whether its existence was necessary to 10 the conduct of the corporation’s business. 11 Grand Jury Subpoena Duces Tecum Dated Apr. 23, 1981 Witness v. United States 12 (“Grand Jury Witness”), 657 F.2d 5, 8 (2d Cir. 1981). 13 Here, Oberlander argues that the documents created when he was a sole 14 proprietor are personal in nature and thus do not fall within the “collective entity” 15 exception. Oberlander is correct to the extent that an unincorporated sole 16 proprietorship is not a “collective entity,” and its documents are therefore entitled 17 to Fifth Amendment protection. See United States v. Doe, 465 U.S. 605, 612–14 (1984) 18 (holding that the compelled production of a sole proprietorship’s records would 19 violate the Fifth Amendment); see also Braswell, 487 U.S. at 104 (“Had petitioner 20 conducted his business as a sole proprietorship, Doe would require that he be 21 provided the opportunity to show that his act of production would entail 30 1 testimonial self-incrimination.”). But simply because a document was not created 2 by a corporation does not mean that it cannot later become a corporate record. 3 Indeed, the identity of a document’s creator is merely one of many factors to be 4 considered in divining its nature. See Grand Jury Witness, 657 F.2d at 8. 5 Having applied the Grand Jury Witness test to the facts in the record before 6 us, we conclude that the documents targeted by the June 2018 Subpoena are 7 corporate in nature and thus exempt from the Fifth Amendment. The subpoena 8 was directed to the custodian of records for Oberlander’s corporate entity, thereby 9 reaching only records in the corporation’s possession. Moreover, the records were 10 maintained for corporate purposes and necessary to the conduct of the 11 corporation’s business: they pertained to the representation of clients that began 12 pre-incorporation but continued post-incorporation. For example, Oberlander 13 represented Jody Kriss from at least 2010 through 2015. See Letter Motion, Kriss v. 14 BayRock Grp., LLC, 10-cv-3959 (LGS) (S.D.N.Y. Mar. 26, 2015), ECF No. 134. Thus, 15 any pre-incorporation records concerning Oberlander’s representation of Kriss 16 have now become necessary corporate documents. Accordingly, though these 17 records were created before Oberlander incorporated his law firm, they have since 31 1 become corporate in nature and are exempt from protection under the Fifth 2 Amendment. 3 IV. Conclusion 4 For the reasons stated above, we VACATE the district court’s October 23, 5 2018 and November 8, 2018 orders. We AFFIRM the district court’s June 27, 2018 6 and September 25, 2018 orders. We further REMAND to the district court for 7 proceedings consistent with this opinion. 32	01-03-2023	08-14-2020
https://www.courtlistener.com/api/rest/v3/opinions/2801480/	UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________ ) Viorel Micula, ) ) Petitioner, ) ) v. ) Civil No. 1:14-cv-00600 (APM) ) The Government of Romania, ) ) Respondent. ) _________________________________________ ) MEMORANDUM OPINION I. INTRODUCTION Petitioner Viorel Micula has asked this court to confirm an arbitration award entered in his favor against the Government of Romania under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Confirming, or recognizing, that arbitration award would render it an enforceable judgment of this court. Micula contends that the court should confirm the award ex parte—that is, without serving the Government of Romania—under 22 U.S.C. § 1650a, which provides: “The pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States.” The question before the court is whether a statute that empowers federal courts to “enforce” an international arbitration award as if it were a final state court judgment permits a federal court, as a precursor to enforcement, to recognize or confirm such an arbitration award on an ex parte basis. The court concludes that section 1650a does not permit use of such an ex parte procedure and therefore denies Micula’s petition. If Micula wishes to have his arbitration award recognized and enforced in a United States federal court, he must file a plenary action, with proper service on the Government of Romania under the Foreign Sovereign Immunities Act of 1976. II. BACKGROUND A. The Convention on the Settlement of Investment Disputes between States and Nationals of Other States The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“Convention” or “ICSID Convention”) established the International Centre for Settlement of Investment Disputes (“ICSID”). Convention on the Settlement of Investment Disputes between States and Nationals of Other States art. 1, opened for signature Mar. 28, 1965, 17 U.S.T. 1270 [hereinafter ICSID Convention]. The Convention entered into effect on October 14, 1966, after it had been ratified by 20 countries, including the United States.1 Id. art. 68; ICSID, Contracting States and Measures Taken by Them for the Purpose of the Convention, at 1-6, ICSID Doc. ICSID/8-A (Sept. 2014). The Convention’s purpose was to promote economic development and private international investment by providing a legal framework and procedural mechanism that could be used to resolve (primarily economic) disputes between private investors and governments. Id. at Preamble; SEN. EXEC. REP. NO. 2, at 1 (1966). “ICSID has jurisdiction over a dispute where two requirements are met. First, there must be an investment-related legal dispute between a state party to the Convention and a national of another state that is also a party to the treaty. Second, the parties to the dispute must consent to ICSID’s jurisdiction.” Mobile Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, __ F. Supp. 3d __, No. 14 Civ. 8163, 2015 WL 631409, at 3 (S.D.N.Y. Feb. 13, 1 As of September 2014, 150 countries had become Contracting States to the Convention. ICSID, Contracting States and Measures Taken by Them for the Purpose of the Convention, at 1, ICSID Doc. ICSID/8-A (Sept. 2014). 2 2015). Where ICSID has jurisdiction, its decisions are final and are subject to review only within ICSID itself. Id. at 4. The Convention, however, did not confer upon ICSID the power to enforce its awards. It left that function to its contracting states. Article 54(1) of the Convention provides: Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state. ICSID Convention art. 54(1). The ICSID Convention was not self-executing. See Medellin v. Texas, 552 U.S. 491, 506 (2008) (explaining when a treaty obligation requires legislation to become domestic law). It thus required its Contracting States to “take such legislative or other measures as may be necessary for making the provisions of this Convention effective in its territories.” ICSID Convention art 69. Congress gave the ICSID Convention domestic effect in the United States by passing the Convention on the Settlement of Investment Disputes Act of 1966 (“Investment Disputes Act”). See Convention on the Settlement of Investment Disputes Act of 1966, Pub. Law 89-532, 80 Stat. 334 (1966) (codified at 22 U.S.C. §§ 1650 and 1650a). Section 3 of the Investment Disputes Act, codified at 22 U.S.C. § 1650a, addresses the enforcement of ICSID arbitration awards in the United States. It provides in full: (a) Treaty rights; enforcement; full faith and credit; nonapplication of Federal Arbitration Act An award of an arbitral tribunal rendered pursuant to chapter IV of the convention shall create a right arising under a treaty of the United States. The pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States. The Federal 3 Arbitration Act (9 U.S.C. 1 et seq.) shall not apply to enforcement of awards rendered pursuant to the convention. (b) Jurisdiction; amount in controversy The district courts of the United States (including the courts enumerated in section 460 of Title 28) shall have exclusive jurisdiction over actions and proceedings under subsection (a) of this section, regardless of the amount in controversy. 22 U.S.C. § 1650a. B. Micula v. Romania Proceedings Before the ICSID Tribunal Petitioner Viorel Micula, along with four co-petitioners2 (collectively, “Claimants”), submitted an arbitration request to ICSID on August 2, 2005. Micula v. Romania, ICSID Case No. ARB/05/20, Award, ¶ 10 (Dec. 11, 2013), ECF No. 1-4. The ICSID tribunal proceedings began on November 10, 2006. Id. at ¶ 16. Claimants asserted that they had made investments in certain regions of Romania in reliance on economic incentives instituted by the Romanian government. See, e.g., id. at ¶ 131; see also Statement of P. & A. in Supp. of Pet. to Confirm ICSID Arbitration Award and Enter J., ECF No. 1-1 at 3 [hereinafter Pet’r’s P. & A.]. When Romania later revoked those incentives, Claimants alleged that they experienced significant financial losses. See, e.g., Micula at ¶¶ 131, 262. Further, Claimants argued that Romania’s actions violated its bilateral investment treaty with Sweden. See, e.g., id. ¶ 131; see also Pet’r’s P. & A. at 3-4. In December 2013, the ICSID tribunal ruled for the Claimants, awarding them monetary damages of 376,433,229 Romanian Leu (RON)—the equivalent of 116,317,868 U.S. Dollars—plus interest at the rate of the three-month Romanian Interbank Offer Rate, plus 5%, compounded on a quarterly basis with respect to certain amounts and periods (“the Award”). Micula at ¶ 1329; Pet’r’s P. & A. at 4; 2 These co-petitioners were Viorel Micula’s brother Ioan Micula and three companies that they controlled, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. Micula v. Romania, ICSID Case No. ARB/05/20, Award, ¶ 2-7 (Dec. 11, 2013), ECF No. 1-4. 4 Updated Statement of P. & A. in Supp. of Pet. to Confirm ICSID Arbitration Award and Enter J., ECF No. 7-1 at 6 [hereinafter Updated Pet’r’s P. & A.]. C. Procedural History in this Court Five months later, on April 11, 2014, Micula filed a petition with this court under 22 U.S.C. § 1650a seeking confirmation of the Award on an ex parte basis (“Petition”).3 Pet. to Confirm ICSID Arbitration Award and Enter J., ECF No. 1 at 1-4. Micula argued that, because section 1650a is purportedly silent as to the proper procedure for confirming an ICSID award, the court should “look to the most analogous state law in crafting the procedural mechanism to confirm such judgments”—here, the District of Columbia Uniform Enforcement of Foreign Judgments Act, D.C. Code § 15-352. Pet’r’s P. & A. at 8. Under that statute, the Superior Court for the District of Columbia is permitted to confirm foreign judgments on an ex parte basis. See id. (citing Nader v. Serody, 43 A.3d 327, 333 (D.C. 2012)). Micula also cited a series of cases from the Southern District of New York in which the courts borrowed New York state procedural rules and confirmed ICSID awards ex parte. See id. (citing cases). Shortly before Petitioner filed in this court, Romania moved before ICSID to annul the Award. Updated Pet’r’s P. & A. at 5. ICSID’s Secretary-General granted Romania an initial stay of enforcement. Id. After ICSID constituted an ad hoc Committee to consider the annulment request, Romania sought an extension of the stay pending the decision on annulment. Id. The ad hoc Committee granted the stay request on August 7, 2014, but made it contingent upon on Romania’s filing of a written assurance that it would make unconditional, full payment of the Award 3 The other Claimaints—Ioan Micula and the Micula brothers’ companies—did not formally join in the petition before this court—at least they were not identified in the case caption or in the body of the Petition as “Petitioners.” However, counsel for Micula stated during a telephonic hearing in this matter that “we do not seek the award to be confirmed only as to our petitioner. We seek it to be confirmed as to all claimants.” Draft Tr. of Telephone Conference at 10, Micula v. Gov’t of Romania, No. 14-600 (D.D.C. Apr. 16, 2015) [hereinafter “Draft Tr.”]. 5 if the request for annulment was denied. Id. When Romania did not file the written assurance, the ad hoc Committee revoked the stay as of September 7, 2014. Id. As a result, Petitioner Micula filed an updated petition, which again requested confirmation of the award on an ex parte basis, as well as entry of judgment of the award after its conversion into US dollars. Id. at 9-10. On February 9, 2015, this court, newly assigned to this matter, entered a minute order seeking an update from Micula as to his “efforts to serve the government of Romania.” Min. Order, Micula v. Gov’t of Romania, No. 14-600 (D.D.C. Feb 9, 2015). In his response to the court’s order, Micula argued that “[a]wards issued by [ICSID] should be confirmed ex parte pursuant to the ICSID Convention and applicable U.S. law.” Status Report, ECF No. 9 at 1. Relying again on decisions from the Southern District of New York, Micula asserted that, “[i]n keeping with the policy goals of the ICSID Convention and its enabling statute, federal courts have routinely confirmed ICSID awards on an ex parte basis.” Id. at 2 (citing cases). Although not served with the Petition, Romania informally appeared in this matter on March 17, 2015, when a Romanian government official sent an email to the court which detailed the ongoing ICSID annulment proceedings, noted Romania’s efforts to secure a U.S. lawyer, and requested an extension of time in which to file a defense. Email from Darius-Bogdan Vâlcov, Minister of Public Finance, to the Honorable Judge P. Amit Mehta, United States District Court for the District of Columbia (Mar. 17, 2015), ECF. No 10-1 at 1. No lawyer, however, entered an appearance on Romania’s behalf, and the court never received a formal response to either Micula’s original or updated Petition. Notwithstanding the lack of a formal response from Romania, this court has closely studied the question whether a federal district court has the authority to confirm an ICSID award on an ex parte basis under section 1650a. The court’s scrutiny stems from the Supreme Court’s admonition 6 that “[s]ervice of process, under longstanding tradition in our system of justice, is fundamental to any procedural imposition on a named defendant,” Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999), as well as the rule that, absent proper service, “federal courts lack the power to assert personal jurisdiction over a defendant,” Mann v. Castiel, 681 F.3d 368, 372 (D.C. Cir. 2010). The court also found it unusual that, in light of international comity concerns, Congress would have granted federal courts the authority to confirm substantial arbitration awards against a foreign government without providing notice through formal service of process. On April 16, 2015, during a telephonic conference in which Romania participated, the court delivered its opinion orally that section 1650a does not permit ex parte confirmation of an ICSID award and denied the Petition. Order, ECF No. 12; Draft Tr. at 12-22. This Memorandum Opinion sets forth the legal analysis supporting the court’s decision. III. LEGAL ANALYSIS A. Interpretation of Section 1650a To determine whether an ICSID award can be confirmed ex parte under section 1650a, the court begins, as it must, with the statute’s text. See Desert Palace, Inc. v. Costa, 539 U.S. 90, 98 (2003) (stating that the “starting point” for statutory analysis “is the statutory text”). Courts are to presume that the “words used” in a statute should be given their “ordinary meaning.” Moskal v. United States, 498 U.S. 103, 108 (1990). When “the words of the statute are unambiguous, the judicial inquiry is complete.” Desert Palace, 539 U.S. at 98 (internal citations omitted). But if the statutory language is not clear, a court may use contextual analysis to determine the meaning of a statute. “Statutory construction . . . is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme—because the same terminology is used elsewhere in a context that makes its meaning clear, or because only one of the 7 permissible meanings produces a substantive effect that is compatible with the rest of the law.” United Savings Ass’n v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 371 (1988) (internal citations omitted). Section 1650a provides minimal guidance on how a federal court should convert an ICSID arbitration award into a federal court judgment. Courts are directed to “enforce” and “give[] the same full faith and credit” to an ICSID award “as if the award were a final judgment of a court of general jurisdiction of one of the several States.” 22 U.S.C. § 1650a. But the statute does not address precisely how a court should go about “enforcing” and “giving full faith and credit” to an ICSID award—whether by complaint, motion, registration, or otherwise. See Mobile Cerro Negro, 2015 WL 631409, at 5 (“The brief text of the enabling statute thus does not specify the procedural mechanism by which an arbitral award is to be converted into a federal judgment.”); see also id., at 5 n.9. Federal district courts are split on how to interpret the limited text of section 1650a; no appellate court has addressed the issue. Trial courts in the Southern District of New York have routinely recognized ICSID awards on an ex parte basis. See, e.g., id.; Grenada v. Grynberg, No. 11 Misc. 45 (S.D.N.Y. Apr. 29, 2011); Siag v. Arab Republic of Egypt, No. M-82 (PKC), 2009 WL 1834562 (S.D.N.Y. June 19, 2009); Enron Corp. & Ponderosa Assets L.P. v. Argentine Republic, No. M-82 (S.D.N.Y. Nov. 20, 2007); Sempra Energy Int’l v. Argentine Republic, No. M-82 (S.D.N.Y. Nov. 14, 2007). The court in Mobile Cerro Negro provided the most comprehensive explanation for this approach. Remarking that “ICSID awards . . . can and are expected to be recognized and enforced in national courts,” Mobile Cerro Negro, 2015 WL 631409, at 4, the court observed that section 1650a was “silent as to the antecedent process by which the award is converted into an enforceable U.S. federal court judgment,” id. at 7. Relying on a variety of 8 sources—previous ICSID enforcement cases; the Rules of Decision Act, 28 U.S.C. § 1652;4 Federal Rule of Civil Procedure 69(a)(1);5 and other areas of law which contain gaps in the federal statutory scheme—the court concluded that “there is compelling authority supporting filling this statutory gap by looking . . . to the law of the forum state.” Id. at 7. Because New York state law permits ex parte recognition of a foreign judgment, the court invoked that procedure to recognize the ICSID award. Id. at 1, 11.6 By contrast, the court in Continental Casualty Co. v. Argentine Republic, 893 F. Supp. 2d 747 (E.D. Va. 2012), in the context of addressing a question of venue transfer, rejected any distinction between recognition or confirmation of an ICSID award, on the one hand, and enforcement, on the other, id. at 752. The court read section 1650a to provide “only for the enforcement of ICSID awards.” Id. Focusing on the statutory text that federal courts should “enforce” an ICSID award as they would a final state court judgment, the court observed that “[t]here is no mechanism for the recognition or confirmation by a federal court of a state court judgment. Unlike state courts that have domestication procedures, federal courts have no procedure for the recognition or confirmation of state court judgments.” Id. at 753. Because federal courts do not recognize or confirm state court judgments, the court reasoned, “Congress in implementing 4 The Rules of Decision Act provides: “The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply.” 28 U.S.C. § 1652. 5 Rule 69(a)(1) states that: “A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.” FED. R. CIV. P. 69(a)(1). 6 In a recent decision, Judge Rudolph Contreras of this court concluded that ex parte recognition of an ICSID award was appropriate under the ICSID Convention and 22 U.S.C. § 1650a. Miminco, LLC v. Democratic Republic of the Congo, No. 14-01987 (RC), 2015 WL 1061555 (Feb. 9, 2015). The reasoning behind Judge Contreras’ opinion, however, was different from that invoked in Mobile Cerro Negro. Judge Contreras found that recognition of an ICSID award should not involve forum state law because “state-law rules governing recognition of foreign judgments have no place in an ICSID enforcement action commencing in federal court.” Id. at 2 n.3. Instead, Judge Contreras reasoned that an ex parte proceeding involving a certified copy of an ICSID award was consistent with the terms and purposes of the ICSID Convention, as well as the previous decisions of other courts. Id. at 2. 9 the ICSID Convention provided a system for enforcement of awards, not for the recognition or confirmation of awards.” Id. at 754-55. Thus, the court concluded that the only available method for converting an ICSID award into a domestic judgment was through the same method by which a state court judgment could be enforced in federal court—“a suit on the judgment as a debt,” or in other words, a plenary proceeding, which would require service on the foreign government. Id. at 754. This court has considered the competing interpretations of section 1650a and concludes that the court’s reading of the statute in Continental Casualty Co. is more consistent with its text and structure. The text of section 1650a expressly requires federal courts to treat ICSID awards in the same manner as “state court judgments.” 22 U.S.C. § 1650a. Notably, the statute uses only the verb “enforce” as it relates to state court judgments; it does not use the verbs “confirm” or “recognize.” That word choice is consistent with the procedural rule that “the proper treatment of a state court judgment by a federal court is not recognition, or registration, but enforcement.” Cont’l Cas. Co., 893 F. Supp. 2d at 753 (“In the federal courts, ‘a judgment of a state court may be sued on as a cause of action in a federal court having jurisdiction.’”) (quoting 50 C.J.S. Judgments § 1364 (2012)). Further, there is no federal statutory mechanism akin to the Uniform Enforcement of Foreign Judgments Act that enables a federal court to register, recognize or confirm a state court judgment. See Atkinson v. Kestell, 954 F. Supp. 14, 15 (D.D.C. 1997) (“State court judgments cannot be registered in this court”; limiting the federal registration statute, 28 U.S.C. § 1963, to registration only of federal court judgments); Marbury Law Group, PLLC v. Carl, 729 F. Supp. 2d 78, 83 (D.D.C. 2010) (finding that the court lacked subject matter jurisdiction to enforce a state court judgment because 28 U.S.C. § 1963 permits registration of only federal court judgments); 10 but see GE Betz, Inc. v. Zee Co., Inc., 718 F.3d 615, 625 (7th Cir. 2013) (disagreeing with Marbury Law Group and permitting confirmation of state court awards under 28 U.S.C. § 1963 if other jurisdictional requirements are satisfied). Instead, as Professors Wright, Miller, and Cooper have written: “The most direct consequence of applying the full faith and credit statute is that a federal court must enforce a state court judgment when an action is brought for that purpose.” 18B CHARLES A. WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE §4469, at 79 (2d ed. 2002) (emphasis added). Because the plain language of the ICSID enabling statute requires arbitral awards and state court judgments to be treated in a parallel manner, it follows that ICSID awards were intended to be enforced by plenary actions. This reading is consistent with other parts of section 1650a. For instance, in subsection (a) of the statute, Congress expressly stated that the “Federal Arbitration Act (9 U.S.C. 1 et seq.) [FAA] shall not apply to enforcement of awards rendered pursuant to the convention.” 22 U.S.C. 1650a(a). Section 9 of the FAA, which Congress enacted before 22 U.S.C. 1650a,7 is entitled “Award of arbitrators; confirmation; jurisdiction; procedure” and permits a prevailing party to “confirm” an arbitration award in federal court. 9 U.S.C. § 9 (emphasis added). Thus, when enacting the ICSID Convention’s enabling statute, Congress was keenly aware that domestic arbitration awards could be confirmed, but elected not to use that procedure for ICSID awards. Requiring an ICSID awardee to file a plenary action also is consistent with subsection (b) of section 1650a. That subsection provides that federal courts “shall have exclusive jurisdiction over actions and proceedings under subsection (a) of this section, regardless of the amount in controversy.” 28 U.S.C. § 1650a(b). The use of the words “actions” and “proceedings” strongly connotes a congressional intent to domesticate ICSID awards through a plenary action, rather than 7 9 U.S.C. § 9 entered into law on July 30, 1947. 11 ex parte confirmation or recognition. The Federal Rules of Civil Procedure provide support for this reading of the statute. Rule 1, in effect when section 1650a was enacted, provides that “[t]hese rules govern the procedure in all civil actions and proceedings in the United States district courts, except as stated in Rule 81.” FED. R. CIV. P. 1 (emphasis added). Rule 2 states that “[t]here is one form of action—the civil action.” FED. R. CIV. P. 2. And, under Rules 3 and 4, “civil actions are required to commence by the filing of a complaint, followed by the issuance and service of a summons.” SEC v. Sec. Investor Prot. Corp., 842 F. Supp. 2d 321, 325 (D.D.C. 2012). “Congress can expressly provide by statute ‘to allow proceedings more summary than the full court trial at common law.’” Id. (quoting N.H. Fire Ins. Co. v. Scanlon, 362 U.S. 404, 407 (1960)). However, by expressly using the words “actions” and “proceedings” in section 1650a, Congress chose not to allow a summary, ex parte process to domesticate an ICSID arbitration award. Compare id. at 326 (finding that Congress intended summary proceedings when it provided that the SEC “may apply” for an order of relief). Although the court finds that the text and structure of section 1650a compel the result here, the enabling statute’s legislative history lends additional support to the court’s conclusion. Both the House and Senate Reports state that “[i]f an action is brought in a U.S. district court to enforce the final judgment of a State court, it is, of course, given full faith and credit in the Federal court. Section 3(a)[8] would give the same status to an arbitral award.” H.R. REP. NO. 1741, at 3-4 (1966) (emphasis added); SEN. REP. NO. 1374, App. at 4 (1966) (emphasis added). Further, both reports refer to Section 3(b)[9] as providing a “uniform procedure for enforcement of awards rendered pursuant to the [C]onvention.” H.R. REP. NO. 1741, at 4 (1966) (emphasis added); SEN. REP. NO. 1374, App. at 4 (1966). Nowhere does either report refer to ex parte proceedings or the need for 8 “Section 3(a)” refers to 22 U.S.C. 1650a(a), which was originally published as Pub. L. No. 89-532, § 3(a). 9 “Section 3(b)” refers to 22 U.S.C. 1650a(b), which was originally published as Pub. L. No. 89-532, § 3(b). 12 confirmation or recognition as a precursor to enforcement, even though Congress knew that such mechanism was possible under the FAA. As with the text of the statute itself, Congress’ use of the term “action” in the legislative history, without reference to a process of recognition or confirmation, indicates an intent to use a plenary proceeding to domesticate an ICSID award. Finally, the court finds later-enacted legislation to be instructive and to further support the court’s reading of section 1650a. See Ginsburg, Feldman & Bress v. Fed. Energy Admin., 591 F.2d 717, 745 (D.C. Cir. 1978) (“[I]t is a well established principle that courts may look to subsequent legislation as an aid in the interpretation of prior legislation dealing with the same or similar subject matter.”). In 1970, only four years after it enacted enabling legislation for the ICSID Convention, Congress passed an enabling statute for another international dispute resolution convention, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Foreign Arbitral Awards Convention”).10 See Act of July 31, 1970, Pub. L. No. 91-368, 84 Stat. 693. Regarding such arbitral awards, Congress provided that “any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration.” 9 U.S.C. § 207 (emphasis added). The Foreign Arbitral Awards Convention enabling statute clearly demonstrates that when Congress wants to permit ex parte confirmation of a foreign arbitration award it knows how to do so. That only four year earlier Congress chose not to include such a process in the ICSID enabling statute is strong evidence that Congress did not intend for parties who had won ICSID awards to confirm such awards. Accordingly, the court concludes that Petitioner Micula must file a plenary action under section 1650a to convert his ICSID award into an enforceable judgment in this court. 10 In delivering its oral ruling, the court mistakenly said that Foreign Arbitral Awards Convention was enacted before the ICSID Convention’s enabling statute. Draft Tr. at 18. This written opinion corrects that error. 13 B. No Conflict with the United States’ Obligations Under the ICSID Convention The court’s interpretation of section 1650a does not conflict with, or abrogate in any way, the United States’ obligations under the ICSID Convention. See Owner-Operator Independent Drivers Ass’n, Inc. v. U.S. Dep’t of Transp., 724 F.3d 230, 234 (D.C. Cir. 2013) (“[C]ourts prefer to avoid such conflicts” “between statutes and treaties”; “Thus, we presume that newly enacted statutes do not automatically abrogate existing treaties.”). To be certain, Article 54 of the ICSID Convention obligates the United States to both “recognize” and “enforce” ICSID awards “as if it were a final judgment of a court in that State.” ICSID Convention art. 54. But the Convention does not obligate its contracting states to adopt any specific method for fulfilling those obligations. See generally id. § 6, arts. 53-55 (articles concerning “Recognition and Enforcement of the Award”). Rather, Article 54(3) contemplates that “the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought.” Id. art. 54(3). And, in the case of “[a] Contracting State with a federal constitution,” Article 54(1) specifies that an award may be enforced “through its federal courts” and that the Contracting State “may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.” Id. art. 54(2). The ICSID Convention anticipates that a Contracting State with a federal constitution, such as the United States, can elect to treat an ICSID award as a final judgment of a constituent state court. That is precisely what section 1650a does. Thus, requiring an ICSID award winner to file a plenary action to recognize and enforce the award does not in any way conflict with the United States’ obligations under Article 54 of the Convention. IV. CONCLUSION For the foregoing reasons, the court concludes that Petitioner must file a plenary action, subject to the ordinary requirements of process under the Foreign Service Immunities Act, to 14 convert its ICSID award against Romania into an enforceable domestic judgment. Therefore, Petitioner’s ex parte Motion to Confirm the ICSID Award is denied without prejudice. A separate order accompanying this Memorandum Opinion was filed on April 16, 2015. Order, ECF No. 12. Dated: May 18, 2015 Amit P. Mehta United States District Judge 15	01-03-2023	05-18-2015
https://www.courtlistener.com/api/rest/v3/opinions/4020522/	NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FILED FOR THE NINTH CIRCUIT AUG 01 2016 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS UNITED STATES OF AMERICA, No. 16-50007 Plaintiff-Appellee, D.C. No. 3:14-cr-02345-CAB v. MEMORANDUM* MARIO VALENCIA-OCHOA, Defendant-Appellant. Appeal from the United States District Court for the Southern District of California Cathy Ann Bencivengo, District Judge, Presiding Submitted July 26, 2016** Before: SCHROEDER, CANBY, and CALLAHAN, Circuit Judges. Mario Valencia-Ochoa appeals from the district court’s judgment and challenges the revocation of supervised release. We have jurisdiction under 28 U.S.C. § 1291, and we affirm. * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Valencia-Ochoa contends that 18 U.S.C. § 3583(e)(3), which provides that a district court may revoke supervised release and impose a term of imprisonment upon finding by a preponderance of the evidence that the defendant violated a condition of supervised release, is unconstitutional under Apprendi v. New Jersey, 530 U.S. 466 (2000). As Valencia-Ochoa concedes, this claim is foreclosed. See United States v. Santana, 526 F.3d 1257, 1262 (9th Cir. 2008). AFFIRMED. 2 16-50007	01-03-2023	08-01-2016
https://www.courtlistener.com/api/rest/v3/opinions/3286628/	This case is identical in its facts with the case ofPeople v. Lensen, ante, p. 336, [167 P. 406], recently decided by this court, and the same points are made upon this appeal for a reversal of the judgment and order denying defendant's motion for a new trial. An extended opinion, therefore, becomes unnecessary. Upon the authority of the Lensen case the judgment and order are reversed. Chipman, P. J., and Hart, J., concurred. *Page 1	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/2994138/	In the United States Court of Appeals For the Seventh Circuit Nos. 98-3137 & 98-3248 TRUSTMARK LIFE INSURANCE COMPANY, f/k/a BENEFIT TRUST LIFE INSURANCE COMPANY, Plaintiff-Appellee/Cross-Appellant, v. THE UNIVERSITY OF CHICAGO HOSPITALS, Defendant-Appellant/Cross-Appellee. Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 94 C 4692--David H. Coar, Judge. Argued September 30, 1999--Decided March 20, 2000 Before HARLINGTON WOOD, JR., COFFEY, and EVANS, Circuit Judges. HARLINGTON WOOD, JR., Circuit Judge. Trustmark Life Insurance Company ("Trustmark"), formerly known as Benefit Trust Life Insurance Company, brought an action under the Employee Retirement Income Security Act, 29 U.S.C. sec. 1001, et seq. ("ERISA"), against the University of Chicago Hospitals & Health System ("UCH") to recover payment made for breast cancer treatment of Grace Fuja, one of Trustmark’s insureds. On July 24, 1998, the district court entered final judgment in favor of Trustmark as to recovery and denied UCH’s state-law defenses as preempted under ERISA. UCH appealed and Trustmark cross-appealed the district court’s denial of attorney’s fees, costs, and prejudgment interest. We reverse. I. BACKGROUND Mrs. Fuja was a participant in an ERISA- governed employee welfare benefit plan (the "Plan") sponsored by her employer Emsco Management Services, Inc. and insured by Benefit Trust Life Insurance Company, now known as Trustmark Life Insurance Company. As a breast cancer patient who had not responded to standard treatment, Mrs. Fuja sought high dose chemotherapy with autologous bone marrow transplant ("HDC/ABMT") treatment. Trustmark denied precertification for HDC/ABMT treatment, claiming it was not "medically necessary" as defined under the Plan. Mrs. Fuja sought injunctive relief against Trustmark’s refusal to cover the HDC/ABMT treatment, and on December 22, 1992, the district court in that case enjoined Trustmark from denying coverage. See Fuja v. Benefit Trust Life Ins. Co., 809 F. Supp. 1333 (N.D. Ill. 1992), rev’d, 18 F.3d 1405 (7th Cir. 1994). On or about December 29, 1992, in a telephone conference, a Trustmark executive stated that Trustmark would comply with the court order, precertification would not be necessary, and Trustmark would pay for the treatment, without specifying any conditions or that payment would be subject to appeal. In a follow-up letter sent to UCH that same day, Trustmark confirmed those statements, specifying that "Benefit Trust Life Insurance Company will comply with the court’s order" and treatment would be paid under Plan benefits, again without attaching any conditions to the payment, which allowed for a $250.00 yearly deductible, 70% of the next $5,000.00, and 100% thereafter for each calendar year. In addition, after receiving notice from Mrs. Fuja that she might not be able to pay her deductible and copayment obligations, UCH decided to waive Mrs. Fuja’s deductible and copay. Prior to entering the hospital for treatment on January 7, 1993, Mrs. Fuja signed an Admission and Out- Patient Agreement with an Authorization and Release of Benefits clause which stated that Mrs. Fuja would be financially responsible for the balance owed if her insurance did not pay the full amount due, which amount might include the costs of collection and/or reasonable attorney’s fees. Less than a month after its unconditional statement of payment, on January 20, 1993, Trustmark filed its notice of appeal. During this period, Mrs. Fuja remained hospitalized until her death in March 1993. Shortly thereafter, Trustmark paid the sum of $362,232.97 to UCH for Mrs. Fuja’s treatment, again without specifying any conditions. Nearly a year later, on March 18, 1994, this court reversed the district court’s judgment, holding that Mrs. Fuja’s HDC/ABMT treatment did not fall within the parameters of "medically necessary" procedures as defined in the Plan policy because the treatment was "furnished in connection with medical . . . research." Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405, 1410 (7th Cir. 1994). Trustmark subsequently filed an action in district court pursuing recovery of the amount paid to UCH for Mrs. Fuja’s HDC/ABMT treatment under sec. 502(a)(3)./1 The district court granted summary judgment in favor of Trustmark, finding a violation of the Plan under ERISA sec. 1132 (a)(3) because this court had already determined that Trustmark was not required to pay for the treatment under the Plan. The district court ordered UCH to reimburse the full amount to Trustmark. UCH appealed the summary judgment finding and Trustmark cross-appealed from the district court’s denial of attorney’s fees, costs, and prejudgment interest. As there are no disputes as to the issues of material facts, summary judgment is appropriate in this case. However, for the reasons set forth below, we reverse the judgment of the district court in favor of Trustmark. We affirm the denial of attorney’s fees, costs, and prejudgment interest. II. ANALYSIS A. Subject Matter Jurisdiction Before reviewing the merits of Trustmark’s claim, we must first decide whether it was properly before the district court. ERISA regulates both employee pension plans and employee welfare benefit plans. 29 U.S.C. sec.sec. 1002(3) & 1003(a). Participants, beneficiaries or fiduciaries of these plans (and the Secretary of Labor) may sue under ERISA. 29 U.S.C. sec. 1132(a). In Central States, Southeast and Southwest Areas Health & Welf. Fund v. Neurobehavioral Assocs., 53 F.3d 172, 173 (7th Cir. 1995) (hereinafter "Neurobehavioral Assocs."), a welfare fund brought an action under sec. 502(a)(3) to recover a mistaken overpayment made to a medical care provider for the medical treatment of one of its members. The court found that the claim fell directly within sec. 502(a)(3) of ERISA’s civil enforcement provision. Id. at 176. The panel stated, "A medical care provider who receives benefits from the fund at the behest of a participant is a beneficiary." Id. at 173 (citation omitted). A dispute over restitution, "undoubtedly an equitable action," id. at 174 (citation omitted), "between a fiduciary [the fund plan] and a beneficiary [a medical care provider] . . . is of primary concern under ERISA."/2 Id. "Forcing trustees of a plan to pay benefits which are not part of the written terms of the program disrupts the actuarial balance of the Plan and potentially jeopardizes the pension rights of others legitimately entitled to receive them." Id. (quoting Cummings v. Briggs & Stratton Retirement Plan, 797 F.2d 383, 389 (7th Cir. 1986)). The court noted in Neurobehavioral Assocs. that the state law claim made by the trustees of the plan would be preempted by ERISA. Id. at 175. Like Neurobehavioral Assocs., UCH is a medical care provider who received benefits from a welfare fund at the behest of a Plan participant, Mrs. Fuja, and is therefore recognized as a beneficiary. Mrs. Fuja sued the Plan in order to have those benefits paid. Fuja, 809 F. Supp. at 1342-43. This circuit then determined that the payment of those benefits was not authorized by the Plan. Fuja, 18 F.3d at 1412. The conclusion was that the Plan language unambiguously excluded coverage for any treatment "in connection with medical or other research." Id. Therefore, subject matter jurisdiction was proper under ERISA. B. Common Law Defenses Although we have determined that Trustmark’s action for recovery of ERISA benefits should be resolved in a federal forum, we must next determine the validity of UCH’s defenses based on common law principles. UCH argues the defenses of breach of contract and promissory estoppel. We will review each claim in order to determine whether such common law principles are applicable under ERISA. We note, given the particular circumstances, that the law of the case doctrine does not foreclose consideration of these issues. This circuit has already determined that all common law concepts are not automatically inapplicable in the ERISA context. Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647 (7th Cir. 1993). In passing ERISA, Congress expected that "a federal common law of rights and obligations under ERISA-regulated plans would develop." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987). Courts may develop a federal common law where ERISA itself "does not expressly address the issue . . . ." Thomason, 9 F.3d at 647 (citation omitted). State common law may be used as a basis in constructing a federal common law that implements the policies underlying ERISA where it is not inconsistent with congressional policy concerns. Id. (citations omitted). 1. Breach of Contract UCH’s primary argument is that the letter from Trustmark promising payment constitutes a private contract which bypasses the Plan. After careful scrutiny of the district court record, we find that UCH has waived this argument as it was not raised at the district court level. See Mouton v. Vigo County, 150 F.3d 801, 803 (7th Cir. 1998) (citations omitted). Although UCH repeatedly discussed the contractual arrangements between Mrs. Fuja and itself (as pertaining to the deductible and copayment waiver), there was never any assertion or discussion that the statements or letter created an independent contractual arrangement, implied or explicit, between UCH and Trustmark. Throughout the district court proceedings, UCH described itself as an independent third party who provided the HDC/ABMT treatment at the direct behest of Mrs. Fuja. UCH repeatedly insisted it had no knowledge of the dispute between Mrs. Fuja and Trustmark. UCH did assert on several occasions that it had relied upon Trustmark’s promise to pay, but did not, at any time, describe that promise as creating an independent contractual agreement nor did UCH argue there was an implied contract. UCH also failed to present a breach of contract argument at any point. However, even if UCH had preserved this issue, we find it would fail. This circuit refused to recognize a breach of contract claim in an ERISA setting. See Buckley Dement, Inc. v. Travelers Plan Administrator of Illinois, Inc., 39 F.3d 784, 789-90 (7th Cir. 1994). We are also reluctant to create a cause of action which supersedes the civil enforcement provisions already enumerated in 29 U.S.C. sec. 1132(a), noting that the Supreme Court has made it clear that those detailed enforcement provisions provide "strong evidence that Congress did not intend to authorize other remedies." Mertens v. Hewitt Assocs., 508 U.S. 248, 254 (1993) (citation omitted). The panel in Neurobehavioral Assocs. found that a welfare fund action to recover a mistaken overpayment made to a medical care provider may not be characterized as a dispute involving only the fiduciary’s interest in collecting a debt from a third party. 53 F.3d at 173. "ERISA preemption is . . . not limited to displacement of state laws affecting employee benefit plans, . . . but rather extends to any state cause of action that has a ’connection or reference to’ an ERISA plan." Id. (citing Pilot Life Ins. Co., 481 U.S. at 47). In its breach of contract argument, UCH characterizes itself as a third party who received payment after entering into an independent contract with the fiduciary. Neurobehavioral Assocs. refused to acknowledge this type of claim involving a medical care provider who had been directed by the insured as an assignee in receiving plan benefits. 53 F.3d at 173. UCH relies on The Meadows v. Employers Health Ins. Corp., 47 F.3d 1006 (9th Cir. 1995), to argue that ERISA does not preempt a health care provider’s state claims for breach of contract, estoppel, and negligent misrepresentation arising out of an insurer’s alleged misrepresentation concerning whether patients were covered by the insurer’s policy. In The Meadows, the Ninth Circuit found that the insurer had made mistaken assurances of coverage. Id. This case and several others UCH relies upon, all from other circuits, are based upon mistaken assurances of coverage. See In Home Health, Inc. v. Prudential Ins. Co., 101 F.3d 600 (8th Cir. 1996); Lordmann Enters., Inc. v. Equicor, Inc., 32 F.3d 1529 (11th Cir. 1994); Hospice of Metro Denver, Inc. v. Group Health Ins., Inc., 944 F.2d 752 (10th Cir. 1991); Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990). The Meadows, In Home Health, Lordmann, Hospice of Metro Denver, and Memorial Hospital System are all distinguished from the present case in that they were state law claims brought in state court by the medical care providers who had never been paid after receiving repeated assurances of coverage by the insurer. After being removed to the district court by the defendants, these cases were all dismissed in federal court and remanded to the state courts. In addition, these cases are distinguished from the present case in that there was no mistaken assurance of coverage. Trustmark had been enjoined from denying coverage and stated that payment was guaranteed so as to "comply with the court’s order." UCH asserts that Trustmark made a promise to pay which created an independent contract. However, as stated in the letter from Trustmark’s executive, "Benefit Trust Life Insurance Company will comply with the court’s order and will cover charges for Mrs. Fuja’s ABMT treatment." (emphasis added). UCH maintains that because Trustmark did not condition its payment pending an appeal, it created an independent contract. Although we agree that Trustmark did not place conditions on its payment, we do not believe the elements of a contract--offer, acceptance, and consideration--are present when one party is compelled by a court order to provide payment, as is the case here. In addition, even UCH concedes in its brief that Trustmark would want to appeal the district court’s order to pay for the treatment as it created an unfavorable precedent that would obligate it to pay for similar kinds of treatment in future cases under the same or similar ERISA plans. As noted in Neurobehavioral Assocs., this disruption of the Plan and the potential effect on the pension rights of others fundamentally involves ERISA. 53 F.3d at 175. For these reasons, we cannot recharacterize the circumstances of the instant case as a breach of contract issue. 2. Estoppel This circuit has recognized that estoppel principles can be applied to certain ERISA actions. Black v. TIC Inv. Corp., 900 F.2d 112, 115 (7th Cir. 1990), reaffirmed by Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 650 (7th Cir. 1993); see also Coker v. Trans World Airlines, Inc., 165 F.3d 579, 584 (7th Cir. 1999) (finding that estoppel claim based on misrepresentations of insurer arises under the federal common law of ERISA). Black expressly limited the application of equitable estoppel principles to claims for benefits under ERISA unfunded, single-employer welfare benefit plans. 900 F.2d at 115. We note that Trustmark, as far as we can ascertain from the record, is an unfunded, single-employer welfare benefit plan. Although the definition and elements of "estoppel" in the ERISA context have been varied, the court in Coker noted that four elements must always be present: (1) a knowing representation, (2) made in writing, (3) with reasonable reliance on that misrepresentation by the plaintiff, (4) to her detriment. 165 F.3d at 585; Black, 900 F.2d at 115. Where all four elements are present, the promise will be enforced in order to avoid injustice. See Evans v. Fluor Distributor Co., Inc., 799 F.2d 364, 366 (7th Cir. 1986) (citing Bank of Marion v. Robert "Chick" Fritz, Inc., 311 N.E.2d 138 (Ill. 1974)). In Coker, the court found that "factual questions such as whether [the defendant] misrepresented (either intentionally or negligently) to the Cokers any material facts about their coverage and whether the Cokers reasonably relied to their detriment on such misrepresentations," could not be resolved by interpreting an existing plan (in that case, a collective bargaining agreement). 165 F.3d at 584. The court determined that the estoppel case arose under federal common law of ERISA, not the collective bargaining agreement. Id. The factual question in this case involves the reasonable reliance of UCH in receiving payment for the medical services provided. In addition, the written confirmation from Trustmark satisfies the rule which requires modification of ERISA plans to be in writing. 29 U.S.C. sec. 1102(a)(1). UCH asserts that it would not have accepted the financial risk of providing HDC/ABMT treatment to Mrs. Fuja had Trustmark not provided a guarantee, but would have sought alternative means to ensure that it would receive payment for services before rendering them. We find that the claim is properly before us, although we reemphasize the narrow scope of such claims. See Coker, 165 F.3d at 585. Summary judgment is reviewed de novo. Feldman v. American Memorial Life Ins. Co., 196 F.3d 783, 789 (7th Cir. 1999) (citation omitted). Summary judgment will be affirmed when, after viewing the record in the light most favorable to the nonmoving party, there is no genuine issue of material fact. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). UCH maintains that Trustmark is estopped from recovering the monies paid for Mrs. Fuja’s HDC/ABMT treatment because of Trustmark’s written (and oral) statements guaranteeing payment. Trustmark clearly promised payment notwithstanding the fact that it was paid "under court order." It is also logical that Trustmark knew or should have known that its promise to pay would induce action on the part of UCH, particularly based on the "urgency" of Mrs. Fuja’s medical condition. In determining whether an employer was entitled to a refund of payments in a restitution claim, the court in UIU Severance Pay Trust Fund v. United Steelworkers of America, 998 F.2d 509, 513 (7th Cir. 1993), stated that several factors should be considered: (1) were the unauthorized contributions the sort of mistaken payments that equity demands be refunded, i.e., was it a good faith mistake or the result of unauthorized activity? (2) has the employer delayed in bringing the action? (3) has the employer somehow ratified past payments? (4) can the employer demonstrate that the party from whom it seeks payment would be unjustly enriched if recovery were denied? Although we may find in favor of Trustmark in answering questions two and three, as to question one, it would have been easy for Trustmark to have made the payment conditional, stating that payment would be made subject to appellate review. However, in failing to do so, Trustmark misled UCH. As to question four, the matter of UCH’s unjust enrichment is of great importance. As discussed in Restatement of Restitution sec. 1, restitution is a device to avoid unjust enrichment. See also Central States Health & Welf. Fund v. Pathology Labs., 71 F.3d 1251, 1254 (7th Cir. 1995) (hereinafter "Pathology Labs."). In Pathology Labs., we noted that "[a] provider of medical care is not unjustly enriched by being paid the market fee for its services." Id. Although we recognize that Trustmark always insisted coverage for the HDC/ ABMT treatments was denied under the Plan, and paid for the treatments under court order, we cannot say that UCH does not have an honest claim to the money. UCH provided services at the market rate, was paid for those services, and was not unjustly enriched. In addition, we agree with the analysis in Rehabilitation Institute v. Group Adm’s, 844 F. Supp. 1275, 1282 (N.D. Ill. 1994), particularly when applied to the health care sector, which stated that "the risk of loss from misstatement in the commercial arena ought to lie with the putative promisor, rather than with the party who justifiably relies on the erroneous promise." We find that Trustmark is estopped from seeking recovery of the unconditional payment made for Mrs. Fuja’s HDC/ABMT treatment. C. Waiver of Copayments Trustmark argues that UCH’s waiver of Mrs. Fuja’s copayment and deductible voids the insurance contract. See Kennedy v. Connecticut Gen. Life Ins. Co., 924 F.2d 698, 699 (7th Cir. 1991). However, Mrs. Fuja remained liable for those amounts, when she entered the hospital on January 7, 1993 for her HDC/ABMT treatments, by signing the Out-Patient Agreement and Authorization, which stated, "I understand that I am financially responsible to pay for my care, and that if my insurance does not pay the full amount due I will be responsible for the balance. This may include costs of collection and/or reasonable attorney’s fees." Unlike the medical care provider in Kennedy, who perpetrated an ongoing scheme of fraud by waiving the copayment but raising the fee, 924 F.2d at 699, UCH’s agreement held Mrs. Fuja ultimately legally responsible for any outstanding balance not covered by insurance. D. Attorney’s Fees, Costs, and Prejudgment Interest Trustmark maintains that it is entitled to attorney’s fees under sec. 502(g)(1) of ERISA. See 29 U.S.C. sec. 1132 (g)(1). Section 502(g)(1) provides, "[i]n any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party." Our decision to reverse the district court’s judgment means that Trustmark is no longer a prevailing party, and, therefore, is no longer entitled to an award of attorney’s fees. Even had Trustmark remained the prevailing party, we agree with the district court’s denial of attorney’s fees, costs, and prejudgment interest. We have chosen to review the merits of this issue because we conclude that each party should bear their own attorney’s fees and costs on appeal. An award of attorney’s fees is reviewed for an abuse of discretion. Filipowicz v. American Stores Benefit Plans Comm., 56 F.3d 807, 816 (7th Cir. 1995). "[A] district court’s determination will not be disturbed if it has a basis in reason." Little v. Lux’s Supermarkets, 71 F.3d 637, 644 (7th Cir. 1995) (citations omitted). The general test for analyzing whether attorney’s fees should be awarded to a party in an ERISA case after it has attained "prevailing party" status is: "[W]as the losing party’s position substantially justified and taken in good faith, or was that party merely out to harass its opponent?" Quinn v. Blue Cross and Blue Shield Assoc., 161 F.3d 472, 478 (7th Cir. 1998) (citations omitted). In determining whether the losing party’s position was "substantially justified," the Supreme Court has stated that a party’s position is "justified to a degree that could satisfy a reasonable person." Pierce v. Underwood, 487 U.S. 552, 565 (1988). The district court determined that UCH had pursued its position in good faith, given the fact that this was not a typical ERISA misrepresentation. UCH knew Trustmark was under court order to provide coverage and was expressly told by Trustmark that it would pay for Mrs. Fuja’s HDC/ABMT treatments. The district court found that when the order given Trustmark to pay for the coverage was reversed, UCH was "substantially justified" in asserting it was not required to reimburse the money for the treatments incurred. As the district court stated, such litigation "was not in any way designed to harass Trustmark." Trustmark also acted in good faith. It was substantially justified in pursuing this action, given this court’s reversal of the injunction. Trustmark was not merely harassing UCH. As we noted earlier, this was an unusual case. Both parties had legitimate claims, with no clear winner or loser. Prejudgment interest may be appropriate in ERISA cases. Lorenzen v. Employees Retirement Plan of Sperry & Hutchinson Co., 896 F.2d 228, 236-37 (7th Cir. 1990). Prejudgment interest is designed not only to fully compensate the victim, but also to prevent unjust enrichment. Id. at 236. Whether to award prejudgment interest to an ERISA plaintiff is "a question of fairness, lying within the court’s sound discretion, to be answered by balancing the equities." Landwehr v. DuPree, 72 F.3d 726, 739 (7th Cir. 1995) (citations omitted). One of the factors considered in determining whether to award prejudgment interest is the presence of bad faith or good will. Id. (internal quotations & citations omitted). UCH received Trustmark’s money as payment for medical services rendered. The district court found that UCH was not unjustly enriched by receiving payment for the treatments it provided to Mrs. Fuja. Nor did the fact that the appellate court determined the Plan did not cover the treatments indicate that UCH was guilty of wrongdoing or bad faith. We believe the district court acted within its discretion in denying Trustmark prejudgment interest. However, in this case, there is no evidence of bad faith on the part of either party. For these reasons, we find that each party should bear its own attorney’s fees and costs. III. CONCLUSION We reverse the district court’s finding of summary judgment in favor of Trustmark and note that each party shall bear its own attorney’s fees and costs on appeal. /1 Section 502(a)(3) states in relevant part: a civil action may be brought-- by a participant, beneficiary or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. 29 U.S.C. sec. 1132(a)(3). Federal courts have exclusive jurisdiction over actions brought pursuant to the above provision. 29 U.S.C. sec. 1132(e). /2 In Connors v. Amax Coal Co., Inc., 858 F.2d 1226, 1229 n.4 (7th Cir. 1988), the Seventh Circuit had previously stated in dicta, "Section 502(a)(3) does not apply to suits by fiduciaries to recover money that they paid to outside entities in violation of the terms of ERISA or the plan." In Connors, trustees of the United Mine Workers of America 1950 Benefit Plan and Trust sought reimbursement from Amax alleging that the company was liable, under the Black Lung Benefits Act, 30 U.S.C. sec. 901-45 ("BLBA"), for payments made for black lung-related medical expenses of miners who worked for Amax. Id. at 1227-28. The trustees brought suit against Amax in district court as subrogees to the miners’ rights, alleging that the company had been unjustly enriched by the plan’s payment of the black lung-related expenses. Id. at 1228. This circuit affirmed the district court’s dismissal for lack of subject matter jurisdiction, ruling that under the BLBA the trustees could only sue in district court to enforce a final compensation order obtained through prescribed procedures, which had not been followed. Id. The district court found that the trustees assertion of ERISA and federal common law was insufficient to confer subject matter jurisdiction. Id. The Connors case is clearly distinguishable from the instant case. In Connors, the trustees of the plan were suing the employer. 858 F.2d at 1227. More importantly, the action in Connors was controlled by the BLBA, which created a preemption exception which occurs when a more specific statutory provision confers exclusive jurisdiction elsewhere and supersedes the application of sec. 1332. Id. at 1228. COFFEY, Circuit Judge, concurring. I write separately only to emphasize that I remain convinced that Trustmark was under no obligation to cover Grace Fuja’s request for bone marrow treatment. See Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405 (7th Cir. 1993). However, the fact remains that Trustmark made the decision and agreed to pay for the bone marrow transplant before this court published its decision without placing any conditions and/or qualification on the promise to pay. So although I am of the opinion, for the reasons stated previously in Fuja, supra, that Trustmark was not legally obligated to pay for the bone marrow transplant under the insurance contract, I agree with the majority’s position that Trustmark, via its unqualified promise to pay, is now estopped from seeking recovery of the money it paid to UCH.	01-03-2023	09-24-2015
https://www.courtlistener.com/api/rest/v3/opinions/1814781/	433 F.Supp. 1077 (1977) Ralph M. BRAUNSTEIN, Alan Russell Kahn, Thomas Kahn, Ruth E. P. Kahn and Viola DeLuca, Plaintiffs, v. LAVENTHOL & HORWATH, Defendant. No. 77 Civ. 167 (LFM). United States District Court, S. D. New York. June 29, 1977. 1078 Willkie, Farr & Gallagher, by Louis A. Craco and Francis J. Menton, Jr., New York City, for defendant. Baer & McGoldrick, by Thomas H. Baer, New York City, for plaintiffs. MacMAHON, District Judge. Defendant moves for summary judgment, pursuant to Rule 56, Fed.R.Civ.P., on grounds that the action is barred by the applicable statute of limitations. Firestone Group Limited ("FGL"), a corporation engaged in real estate syndication, retained defendant, Laventhol & Horwath, in November 1969 to prepare and issue a report and audited financial statements to be used in connection with the private placement of $7.5 million of FGL securities. Plaintiffs, purchasers of a portion of those securities, allege that defendant issued the financial statements on December 6, 1969 and that FGL delivered them to plaintiffs on or about December 16, 1969. Plaintiffs contend that those financial statements were false and misleading because they overstated FGL's income, and that their reliance on the statements led to damages which they subsequently suffered. They charge defendant with violations of the federal securities laws, specifically, Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j), Rule 10b-5 (17 C.F.R. § 240.10b-5), Section 17(a) of the Securities Act of 1933 (15 U.S.C. § 77q), and various obligations imposed by the common law. We will initially address defendant's motion for summary judgment on plaintiffs' first claim, which is for violation of the federal securities laws. Section 10(b) of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933 have no accompanying statute of limitations for civil violations and, therefore, the statute of limitations of the forum state is applicable. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n.29, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Klein v. Shields & Co., 470 F.2d 1344, 1346-47 (2d Cir. 1972). The parties agree that N.Y. CPLR §§ 203(f) and 213(8) are the relevant statutes establishing the limitations period. 1079 Those statutes, when read together, provide that, in actions based on fraud, suit must be commenced either within six years of the time the fraud is committed or within two years of the time the fraud is or, with reasonable diligence, could have been discovered by plaintiff, whichever period is longer. See Schmidt v. McKay, 555 F.2d 30, at 36-37, No. 76-7422 (2d Cir. 1977); Klein v. Shields & Co., supra, 470 F.2d at 1346-47; Stull v. Bayard, 424 F.Supp. 937, at 941 (S.D.N.Y.1977). Although state law determines the length of the limitations period, federal law determines when the period begins to run. Arneil v. Ramsey, CCH Fed.Sec.L.Rep. para. 95,865 at 91,180 (2d Cir. 1977); Moviecolor Ltd. v. Eastman Kodak Co., 288 F.2d at 80, 83 (2d Cir.), cert. denied, 368 U.S. 821, 82 S.Ct. 39, 7 L.Ed.2d 26 (1961). Plaintiffs concede that this action was not brought within six years of the time the acts constituting the fraud were committed, and they rely solely upon the two-year limitations period. Defendant contends, however, that there are a number of events which establish that plaintiffs knew or, with reasonable diligence, could have known of the facts constituting any alleged fraud prior to January 13, 1975, and that, therefore, the two-year statute of limitations bars their claim under the federal securities laws since they did not commence this action until January 13, 1977. We agree with defendant. The events which transpired between December 1969, when defendant's allegedly fraudulent acts occurred, and January 13, 1975 undoubtedly should have alerted plaintiffs to the existence of the alleged fraud. FGL petitioned for reorganization under Chapter XI of the federal bankruptcy law in 1971. There was an 85% drop in the value of FGL stock from December 1969 to October 1971. In June 1971, Gerald L. Herzfeld brought suit against defendant in the Southern District of New York, the residence of the majority of plaintiffs, on claims substantially similar to those now asserted by plaintiffs against defendant. Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, 71 Civ. 2209 (LFM). In or about February 1972, plaintiffs were canvassed by Allen Co. and/or Allen Inc., parties to that action, and were asked if they would like to assign whatever claims they might have that were similar to Herzfeld's for purposes of asserting such claims in the Herzfeld action. Public trial of that action took place before us on October 15-29, 1973. We rendered our decision in that action on May 29, 1974, see 378 F.Supp. 112, and it received coverage in the national press. Our Court of Appeals has ruled that such facts are sufficient to charge plaintiffs with knowledge of alleged fraudulent acts. Berry Petroleum Co. v. Adams & Peck, 518 F.2d 402, 410 (2d Cir. 1975) (trading suspensions, precipitous decline in stock price, other lawsuits); Klein v. Shields & Co., supra, 470 F.2d at 1347 (other lawsuit). See Stull v. Bayard, supra, 424 F.Supp. at 941 (other lawsuit). Accord, Hupp v. Gray, 500 F.2d 993, 996-97 (7th Cir. 1974) (decline in stock price). As the Court of Appeals has stated: "[T]he time from which the statute of limitations begins to run is not the time at which a plaintiff becomes aware of all the various aspects of the alleged fraud, but rather the statute runs from the time at which plaintiff should have discovered the general fraudulent scheme. `[T]he statutory period . . . [does] not await appellant's leisurely discovery of the full details of the alleged scheme.' Klein v. Bower, 421 F.2d 338, 343 (2d Cir. 1970)." Berry Petroleum Co. v. Adams & Peck, supra, 518 F.2d at 410. Since the Herzfeld plaintiffs discovered the fraud, "there is no doubt that the fraud was discoverable" prior to January 13, 1975. Berry Petroleum Co. v. Adams & Peck, supra, 518 F.2d at 410. The recent decision of the Second Circuit in Schmidt v. McKay, supra, 555 F.2d 30, No. 76-7422 (2d Cir. 1977), does not compel a different result. In that case, the district court had granted summary judgment on grounds that the period of limitations had expired because the plaintiff could have discovered the alleged fraud over two years before he commenced the action. The 1080 Court of Appeals reversed and held that under the facts of that case, there was a genuine issue of fact as to whether the fraud was discoverable by plaintiff within the applicable period. Schmidt, thus, did not hold that summary judgment may not be awarded on the ground that the statute of limitations has run. Here, however, there is no genuine issue of fact as to whether plaintiffs knew of, or with reasonable diligence could have discovered, the fraud prior to January 13, 1975. There is no issue of fact concerning the events chronicled above, most importantly, our prior decision in Herzfeld, the press coverage of that case, and plaintiffs' actual knowledge of that case from Allen's request for assignment of their claim. There is only one reasonable inference to be drawn from those events, contrary to the situation in Schmidt, and that inference is that plaintiffs knew of, or with reasonable diligence could have discovered, defendant's alleged fraud prior to January 13, 1975. Plaintiffs do not even attempt to argue that they could not have known of the underlying facts of defendant's fraud, a contention which would have been untenable in light of those events. Nevertheless, they argue that they cannot be charged with knowledge of the alleged fraud prior to January 13, 1975 because of the uncertain legal significance of the acts of defendant at that time. They assert that the underlying facts of defendant's fraud were not "sufficient in law" as of that date to charge them with knowledge because (1) they could not have known that scienter was a necessary element in a Section 10b-5 claim, or (2) that accountants could have been liable under that section until the Supreme Court's decision in Ernst & Ernst v. Hochfelder, supra, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668. They further argue that they could not have known that they had a reasonable basis for a Section 10b-5 claim against defendant until the decision of the Court of Appeals for the Second Circuit in Herzfeld v. Laventhol, Krekstein, Horwath & Horwath, 540 F.2d 27 (2d Cir. 1976). Plaintiffs contend, therefore, that either March 30, 1976, the date of decision in Hochfelder, or July 15, 1976, the date of the appellate decision in Herzfeld, is the appropriate date from which the two-year statute of limitations should run. Plaintiffs' reliance upon United States v. One 1961 Red Chevrolet Impala Sedan, 457 F.2d 1353 (5th Cir. 1972), for this proposition is misplaced. There, plaintiff sued for the return of property which had been forfeited to the United States in 1963 because it had been used in conducting an illegal gambling business without payment of taxes and without the required registration. Although later case law had rendered such a forfeiture improper,[1] the government maintained that the plaintiff was barred from recovering his property because the applicable statute of limitations had run. The court ruled that the statute of limitations did not accrue until later case law had established that the privilege against self-incrimination was a complete defense to prosecution for violation of federal wagering tax and registration statutes.[2] Until that date, the plaintiff "had no reasonable probability of successfully prosecuting his claim against the government . . .. This is not . . . a case in which a plaintiff is ignorant of his rights, but rather a case of a plaintiff without a right." United States v. One 1961 Red Chevrolet Impala Sedan, supra, 457 F.2d at 1358. Braunstein et al. v. Laventhol & Horwath, 77 Civ. 167 (LFM). Here, plaintiffs are clearly not within the principle enunciated in Chevrolet. First, this is not the case of a "plaintiff without a right." A civil cause of action for violation of Section 10b-5 has been recognized since Kardon v. National Gypsum Co., 69 F.Supp. 512, 513-14 (E.D.Pa.1946), and the potential liability of accountants 1081 under that section was recognized in H. L. Green Co. v. Childree, 185 F.Supp. 95, 96 (S.D.N.Y.1960). In addition, plaintiffs certainly had a "reasonable probability of successfully prosecuting" their claims against defendant after our decision in Herzfeld in May 1974. That decision was res judicata and entitled to collateral estoppel effect until reversed, vacated or remanded. See 1B J. Moore, Federal Practice para. 0.416[3], at 2253 (2d ed. 1974). Furthermore, plaintiffs' purported quandary as to whether to plead scienter seems factitious in light of the fact that in Herzfeld we found that defendant, Laventhol, Krekstein, Horwath & Horwath, acted with the requisite scienter. Finally, although there was some conflict between circuits as to the necessity of proof of scienter in a Section 10b-5 civil claim, it had been clear since Lanza v. Drexel & Co., 479 F.2d 1277 (2d Cir. 1973), that such proof was required in the Second Circuit. We, therefore, grant summary judgment for defendant on plaintiffs' claim under the federal securities law. The remaining claims are all grounded on state law. Although we have the power to adjudicate those claims under our pendent jurisdiction, we must determine, in light of the principles enunciated in United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), whether we should decline to exercise such jurisdiction. A federal court should decline to exercise pendent jurisdiction unless judicial economy, convenience and fairness to litigants are promoted. United Mine Workers v. Gibbs, supra, 383 U.S. at 726, 86 S.Ct. 1130. Those interests would not be served by the exercise of jurisdiction over the state law claims in this case because all the federal claims have been eliminated. As the Supreme Court said in addressing this problem in United Mine Workers v. Gibbs, supra, 383 U.S. at 726-27, 86 S.Ct. at 1139: "Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well." The Second Circuit has consistently followed this policy. See Calderone Enterprises Corp. v. United Artists Theatre Circuit, 454 F.2d 1292, 1297 (2d Cir. 1971), cert. denied, 406 U.S. 930, 92 S.Ct. 1776, 32 L.Ed.2d 132 (1972); Abrams v. Carrier Corp., 434 F.2d 1234, 1254 (2d Cir. 1970), cert. denied sub nom. United Steelworkers v. Abrams, 401 U.S. 1009, 91 S.Ct. 1253, 28 L.Ed.2d 545 (1971); Yanity v. Benware, 376 F.2d 197, 201 (2d Cir.), cert. denied, 389 U.S. 874, 88 S.Ct. 167, 19 L.Ed.2d 158 (1967). Moreover, it recently ruled that, absent special circumstances, it would be an abuse of discretion to retain jurisdiction for trial of a pendent state claim when the federal claims had been eliminated from the case. See Nolan v. Meyer, 520 F.2d 1276, 1280 (2d Cir.), cert. denied, 423 U.S. 1034, 96 S.Ct. 567, 46 L.Ed.2d 408 (1975). Accordingly, we grant summary judgment to defendant on plaintiffs' first claim, which is for violation of the federal securities laws, and dismiss the remaining state law claims without prejudice to prosecution of those claims in state court. So ordered. NOTES [1] See United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971). [2] See Grosso v. United States, 390 U.S. 62, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968); Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968).	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1813784/	691 F.Supp. 358 (1988) NAKAJIMA ALL CO., LTD., and Nakajima U.S.A., Inc., Plaintiffs, v. UNITED STATES, Defendant, Smith-Corona Corp., Defendant-Intervenor. Court No. 88-02-00079. United States Court of International Trade. June 22, 1988. 359 McDermott, Will & Emery, (R. Sarah Compton and Kurt J. Olson, on the motions and the briefs; Patrick J. Cumberland, Washington, D.C., on the briefs), for plaintiffs. Patton, Boggs & Blow, (Michael D. Esch, Washington, D.C., on the motions) of counsel for plaintiffs. John R. Bolton, Asst. Atty. Gen.; David M. Cohen, Director, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice, (M. Martha Ries, on the motions); and Office of the Chief Counsel for Intern. Trade, U.S. Dept. of Commerce (Lisa B. Koteen, Washington, D.C., of counsel on the motions) for defendant. Stewart and Stewart, (Eugene L. Stewart, Terence P. Stewart, and James R. Cannon, Jr., Washington, D.C., on the motions and the briefs) for defendant-intervenor. MEMORANDUM OPINION AND ORDER CARMAN, Judge: Plaintiffs filed their action requesting, inter alia, a writ of mandamus to be issued directing the defendant, United States Department of Commerce, International Trade Administration (Commerce), to complete and publish the results of various preliminary and final administrative § 751 reviews (751 reviews) pursuant to § 751 of the Tariff Act of 1930, as amended by the Trade and Tariff Act of 1984, 19 U.S.C. § 1675 (1987). The 751 reviews at issue are four separate reviews covering the following time periods: 5/1/824/30/83 (Q4); 5/1/834/30/84 (Q5); 5/1/844/30/85 (Q6); and 5/1/854/30/86 (Q7). The reviews at issue covered Commerce's antidumping investigation of portable electric typewriters (PETs) from Japan. On the return date, February 11, 1988, in open court, the Court directed the defendant to propose a schedule as to when the various section 751 reviews would be completed, directed the parties to confer and submit to the Court a proposed stipulation of facts, and continued the hearing until February 19, 1988. On February 19, 1988, in open court, the Court reserved its decision on plaintiffs' action for a writ of mandamus and continued the case with certain requirements. See Nakajima All Co., Ltd. v. United States, ___ CIT ___, ___, 682 F.Supp. 52, 60 (1988), appeal docketed, No. 88-1430 (Fed.Cir. May 19, 1988). After further delays, Commerce published the preliminary results of the 751 reviews at issue (Q4-Q7) on June 3, 1988. The Court now exercises its continued jurisdiction over the matter and directs Commerce to complete the final results of the 751 reviews, Q4-Q7, by October 15, 1988. FACTS Plaintiffs Nakajima All Co., Ltd. and Nakajima U.S.A., Inc. (plaintiffs) filed this action for a writ of mandamus directing Commerce to complete and publish four preliminary and final 751 administrative review results regarding Commerce's antidumping investigation of portable electric typewriters from Japan. Plaintiffs also filed a motion for an order to show cause why this action should not be expedited. Plaintiffs shortly thereafter withdrew their motion for an accelerated discovery and a trial de novo. At issue are four annual 751 reviews of an antidumping investigation and order concerning portable electric typewriters (PETS) produced and exported from Japan. The antidumping order has been in effect since May of 1980. Commerce has conducted eight 751 reviews since the order, completing and publishing the preliminary and final results of only the first three. The 751 reviews at issue (the fourth, fifth, sixth and seventh) involve sales covering 360 the years 1982 through 1986. The parties submitted to the Court a proposed stipulation of facts concerning the several 751 reviews at issue. The Court notes those facts as well as the Court's further recitation of other relevant events are set forth in Nakajima All, 682 F.Supp. 52 and need not be further repeated. The Court issued its Slip Opinion and Order, Nakajima All, id., on March 3, 1988. The Court, in its Order, directed the parties to submit periodic status reports concerning the proceedings involved with the completion of the preliminary results. The Court also directed the parties to appear periodically before the Court to address the status of the proceedings. Defendant, in its status reports, complained to the Court of the burden it perceived Commerce had to bear in completing the status reports and conferring with counsel pursuant to those chores. Plaintiff continued to complain of the delays in the completion of the review results and repeatedly requested the Court to issue a writ of mandamus to compel Commerce to complete the preliminary and final results of the 751 reviews. On May 26, the Court held a telephone conference with all the parties concerning the status of the case. Noting defendant's dissatisfaction with the Court's order of March 3, 1988,[1] the Court observed: [The Court] was under the impression that this proceeding that had been adopted or this procedure that had been adopted was designed to be helpful to the government, the amicus and to the plaintiffs. And, it is in that context that [the Court] adopted this particular procedure with what [the Court] anticipated was to be the cooperation of counsel on all sides in order to expedite the Department of Commerce's ability to get these proceedings completed. Suffice it to say, [the Court] will not permit the Court to be the administrative agency nor is the Court interested in being involved in impeding the administrative process. Transcript of Telephone Conference at 11, May 26, 1988, Nakajima All (Transcript). The Court concluded with the following: In addition to that, insofar as the order coming from the Slip Op. dated March 3, 1988 is concerned, the Court will vacate the requirement for various status reports and leave standing in regard to that order, its reservation as to whether or not a mandamus, writ of mandamus, should issue. Other than that, the rest of the portion of that order will continue and, the Court will continue to maintain jurisdiction over this proceeding as it unfolds. Id. at 14. The Court granted amici curiae its motion to intervene and granted defendant-intervenor opportunity to file any additional comments with the Court. The Court, as stated above, reconsidered whether or not a mandamus should issue and decided, in light of the high probability that the May 31, 1988 completion date was firm, the writ of mandamus would not issue as to the preliminary review results from Q4-Q7. The Court also vacated the Court's order inclusive in the Nakajima All opinion but left standing the reservation on whether or not a writ of mandamus should issue. The Court ordered the rest of that order would continue as would the Court's jurisdiction over the action. On June 3, 1988, Commerce published the preliminary results of its administrative reviews of Q4-Q7. Portable Electric Typewriters From Japan, 53 Fed.Reg. 20353 (June 3, 1988). Commerce, in the published results, included the following statement: Interested parties may request disclosure and/or an administrative protective order within 5 days of the date of publication of this notice and may request a hearing within 8 days of publication. 361 Any hearing, if requested, will be held 35 days after the date of publication or the first workday thereafter. Prehearing briefs and/or written comments from interested parties may be submitted Not [sic] later than 25 days after the date of publication. Rebuttal briefs are rebuttals to written comments, limited to issues raised in those comments, may be filed not later than 32 days after the date of publication. The Department will publish the final results of the administrative review, including the results of its analysis of any such comments or hearing. DISCUSSION The Court's jurisdiction to hear this action and decide whether or not to issue a writ of mandamus has been set forth at length in the Court's opinion in Nakajima All, 682 F.Supp. 52 (1988), and need not be set forth here. Although mandamus has been recognized as an extraordinary remedy, the Court has authority to provide this remedy pursuant to 28 U.S.C. §§ 1585, 1651(a) and 2643(c)(1). See Sharp Corp. v. United States, 837 F.2d 1058 (Fed.Cir.1988). The Court observes the issuance of a writ of mandamus is: "an extraordinary equitable remedy which should be employed to compel the performance of a ministerial duty specifically enjoined by law where performance has been refused, and no meaningful alternative remed[y] exist[s]." UST. Inc. v. United States, ___ CIT ___, ___, 648 F.Supp. 1, 5 (1986); aff'd on other grounds, 831 F.2d 1028 (Fed.Cir.1987). Unreasonable delays in the agency performance of ministerial duties may also constitute sufficient basis for a writ of mandamus to issue. See Id.; Matsushita Electric Industrial Co., Ltd. v. United States, ___ CIT ___, 688 F.Supp. 617 (1988), notice of appeal filed (CIT June 13, 1988). An agency has a certain amount of statutory discretion in the way it conducts its affairs, procedures, and investigations. A reviewing court, when confronted with a petitioner's challenge to an agency action, must exercise a certain amount of prudence and restraint in dictating how an agency must perform. Nevertheless, where an agency has a statutory timeframe within which to carry out those functions, it is incumbent upon the reviewing court to insure the agency complies with those requirements in a timely manner. Regardless of the fact that the statutory mandate of Congress setting forth a timeframe is mandatory or directory, the Court has a duty "to determine `whether the agency's delay is so egregious as to warrant mandamus.'" Sierra Club v. Thomas, 828 F.2d 783, 797 (D.C.Cir.1987) (citation and footnote omitted). The court, in Sierra Club, made its observations in a case where the agency had a statutory duty to avoid "unreasonable delay." Although that is not the exact situation in the instant action,[2] the findings of the court in Sierra Club provide important analogous instruction for the Court's review of Commerce's delays in publishing the preliminary and final results of its 751 reviews. The court, in Sierra Club, was guided by the following in its review of the agency's delay: It is well established that, in conducting this review, "[t]he reasonableness of the delay must be judged `in the context of the statute' which authorizes the agency's action." In particular, if, as in this case, the claim is that the agency's delay deprives the petitioner of a statutory right to timely decisionmaking [sic], then we look to see whether Congress has imposed any applicable deadlines or otherwise exhorted swift deliberation concerning the matter before us or whether the statutory scheme implicitly contemplates 362 timely final action; whether interests other than that of timely decisionmaking [sic] will be prejudiced by delay; and whether an order expediting the proceedings will adversely affect the agency in addressing matters of a competing or higher priority. When we assess these factors, we must remember that, "[a]bsent a precise statutory timetable or other factors counseling expeditious action, an agency's control over the timetable of a rulemaking [sic] proceeding is entitled to considerable deference." Id. at 828 F.2d 797. (footnotes omitted). It has been recognized in a few cases that the timetable for completion of § 751 reviews is directory and not mandatory because Congress did not provide for a prohibition or adverse consequence to be imposed for failing to meet the statutory deadline. See Philipp Bros., Inc. v. United States, ___ CIT ___, ___, 630 F.Supp. 1317, 1323 (1986), appeal dismissed, No. 86-1122 (Fed.Cir. July 18, 1986); American Permac, Inc. v. United States, ___ CIT ___, ___, 642 F.Supp. 1187, 1191-92 (1986). These cases, though, are distinguishable from the case at bar since the court in Philipp Bros. and American Permac was faced with petitioners' request to impose penalties, in the form of liquidation, on Commerce for failing to comply with the statutory deadlines. In Philipp Bros., the court was petitioned to find the merchandise at issue liquidated by operation of law, 19 U.S.C. § 1504(a), when the time period of suspension of the liquidation of the merchandise extended beyond the twelve-month time limit for the § 751 review. Plaintiffs, in Philipp Bros., argued the suspension automatically terminated at the end of the twelve-month period allowed for the 751 review and, therefore, the merchandise should have been liquidated. The Court, in its analysis, concluded: there is nothing in the statute or legislative history that compels the conclusion that the implied suspension automatically terminates at the close of the twelve-month period specified in section 751. Thus, in this situation, the court is unable to conclude that the statute imposes a penalty of deemed liquidation for the delay. Although ITA's failure to comply with the statutory time limit is not condoned by this court, this failure to act in a timely manner did not deprive ITA of jurisdiction to complete the section 751 review. Philipp Bros., 630 F.Supp. at 1324 (emphasis added and footnote omitted). The court, in American Permac, was faced with a similar challenge to Commerce's actions under 19 U.S.C. § 1504(d). Section 1504(d) provided that any entry not liquidated after four years from the entry date or withdrawal from warehouse date is deemed liquidated at the initial assessed amount unless liquidation is under suspension by statute or court order. The court stated: In this case, the ITA did not publish its review determination until over four years after the latest entry date covered by the review. Plaintiffs do not dispute that the pendency of the § 1675(a) review necessitated an extension of the liquidation period beyond the one-year deadline specified in § 1504(a). They contend, however, that there was no lawful basis for an extension or suspension beyond the four-year limit under § 1504(d). Plaintiffs assert that there was no statutory authority for a suspension beyond that limit; and since defendant failed to seek a court ordered suspension, the entries should have been deemed liquidated after four years. American Permac, 642 F.Supp. at 1190. The court concluded: The "deemed liquidated" penalty of § 1504 operates irrationally, and if applied in an antidumping context could lead to particularly inequitable assessments, since the amount of deposited duties may bear little relation to actual dumping margins. In that situation it would seem especially critical that parties be guaranteed an adequate means to challenge the basis of the assessments. The scheme for judicial review of agency determinations under the new law, if applicable at all, is ill-suited to that purpose. 363 Congress' failure to address this difficulty, coupled with its clearly expressed expectation that periodic review determinations would provide the basis for antidumping duty assessments on covered entries, persuades the court that Congress intended the statutory suspension of liquidation during a periodic review to override the possibility of deemed liquidation under § 1504(d). The court, of course, does not condone the ITA's failure to meet its statutory time limits. However, the availability of an action to enforce those time limits accords adequate protection to parties who are truly aggrieved by undue agency delays. Id. at 1197 (footnote omitted). The Court finds, from the analysis in Philipp Bros. and American Permac, the directory or mandatory nature of the statute is important for the Court to consider when a court is petitioned to hold merchandise deemed liquidated (i.e., in the nature of a penalty) where Commerce does not meet the twelve-month deadline under 19 U.S.C. § 1675(a)(1). Such is not the case at bar and does not appear to affect plaintiffs' petition here. The Court, in the instant action, is not asked to liquidate merchandise or penalize Commerce, but to compel Commerce to complete the 751 reviews after undue delays of up to five years. The Court is asked to exercise its statutory authority to enforce the statute and, therefore, compel Commerce to "reasonably" comply with its statutory deadline of twelve-months. Brock v. Pierce County, 476 U.S. 253, 106 S.Ct. 1834, 90 L.Ed.2d 248 (1986);[3]Nakajima All, 682 F.Supp. at 57; UST, Inc., 648 F.Supp. at 4; American Permac, 642 F.Supp. at 1192 ("that remedy (judicial action to enforce the statutory deadline) clearly would be available to participants in ITA review proceedings where the ITA exceeds the publication deadline, by virtue of this court's jurisdiction under 28 U.S.C. § 1581(i)(4)"). This "reasonable" compliance translates to directing Commerce to complete its 751 review proceedings of Q4-Q7 before the delays in completion extend to a point encompassing a length of time beyond three to six years. The Court of Appeals for the Federal Circuit has recognized the Court has the authority to exercise its sound discretion to fashion an appropriate remedy in compelling Commerce to complete the processing of ongoing administrative reviews in appropriate circumstances. Sharp Corp. v. United States, 837 F.2d 1058 (Fed.Cir. 1988). The Court has previously exercised this authority when Commerce has delayed conducting 751 reviews for over four years. Matsushita Electric Industrial Co., 688 F.Supp. at 624-25 (where the court found a delay of four years in the administration of 751 reviews to warrant compelling Commerce to complete the reviews by a certain date.) The Court, notwithstanding these observations, recognizes the burdens expressed by defendant that Commerce has experienced 364 in completing the reviews with being understaffed, receiving less than adequate funds, and experiencing other short comings commonly recognized in the administration of federal agency duties. This Court is not unsympathetic to this encumbrance. Nevertheless, these problems do not control in the agency's requirement to meet the statutory mandates legislated by Congress in 19 U.S.C. § 1675. If these problems are retarding the administration of Commerce's duties to such an extent as is present in this case, then it would seem imperative to voice these concerns to Congress. The delay in completing the administrative reviews of Q4-Q7 extending back to April 18, 1983 is of sufficient concern to the Court and of equally great prejudice to plaintiffs to warrant a writ of mandamus issue. The statute, § 1675, presents a clearly discernible timetable imposed by Congress concerning the completion of the reviews. Although this Court has recognized Commerce's discretion in carrying out its functions, Commerce is not immune from court supervision, pursuant to § 1581(i)(4), especially when executing its functions unreasonably, arbitrarily, or in a manner contrary to law. Plaintiff is prejudiced by these undue delays. Not only is plaintiff denied any semblance of a timely made decision, but has incurred financial burdens of lost sales volume due to the added cost of deposit rates and other opportunity costs connected with restricted resources. The public interest is also prejudiced by the impediment to the free flow of commerce caused by these inordinate delays. In addition, the issuance of the mandamus will not have an adverse affect on Commerce's ability to "address matters of a competing or higher authority." Commerce has completed the preliminary results and is in the process of receiving comments and briefs on the preliminary results on a certain time schedule encompassing thirty-five days after the publishing of those results. Notwithstanding these dates, Commerce did not set a date certain for the completion of the final results. This reluctance to publish a date or even indicate an estimated completion date concerns the Court. The Court, in its continued jurisdiction of this case, has the authority to insure the completion of the final results of Q4-Q7 will not fall victim to the same circumstantial delays surrounding the completion of the preliminary results of Q4-Q7. Therefore, in accordance with the Court's opinion, Commerce is directed to complete and publish the final results of the 751 reviews of Q4-Q7, covering the time periods May 1, 1982 to April 30, 1986 by October 15, 1988. This Court's order will be entered accordingly. NOTES [1] Defendant filed an appeal of the Court's Order of March 3, 1988 to the Court of Appeals for the Federal Circuit on May 19, 1988. Defendant also filed a motion for stay pending appeal on May 25, 1988. Since the Court vacated, in part, its Order concerning those issues appealed, the Court denied defendant's motion on June 20, 1988 in furtherance of the Court's concern to avoid further delays. [2] Although the administrative review statute, 19 U.S.C. § 1675, does not employ the words "unreasonable delay", Congress was explicit in setting forth the 12-month timeframe in which Commerce "shall review and determine ... and shall publish the results of such review...." 19 U.S.C.A. § 1675(a)(1) (1987) (in pertinent part). [3] The Court, in Pierce County, undertook to interpret Section 106(b) of the Comprehensive Employment and Training Act (CETA), 29 U.S. C. § 816(b) which "provides that the Secretary of Labor ... `shall' issue a final determination within 120 days.... The question presented in [Pierce County was] whether the Secretary loses the power to recover misused CETA funds after that 120-day period has expired." Pierce County, 476 U.S. at 254-55, 106 S.Ct. at 1836. The Court observed: We would be most reluctant to conclude that every failure of an agency to observe a procedural requirement voids subsequent agency action, especially when important public rights are at stake. When, as here, there are less drastic remedies available for failure to meet a statutory deadline,7 courts should not assume that Congress intended the agency to lose its power to act. Id. at 260, 106 S.Ct. at 1839. The Court, in footnote 7, suggested a complainant may ask for a less drastic remedy by bringing an action in court challenging the Secretary's failure to act by lengthy delays. The court would then "have the authority to `compel agency action ... unreasonably delayed.'" Id. at n. 7. Here, the plaintiff is asking for a "less drastic remedy" by compelling the agency to act when it has unreasonably delayed completion of the Q4-Q7 reviews for a period of two-five years. The Court seeks not for Commerce "to lose its power to act," but rather to encourage Commerce to utilize that power to act in a more alacritous manner.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/1670038/	899 F. Supp. 1254 (1995) Lissa Morrow CHRISTIAN, Plaintiff, v. NEW YORK STATE BOARD OF LAW EXAMINERS, et al., Defendants. No. 94 Civ. 0949 (RO). United States District Court, S.D. New York. October 17, 1995. 1255 Lissa Morrow Christian, Bayside, NY, Plaintiff Pro Se. G. Oliver Koppell, Attorney General of the State of New York, Bronx, NY, for Defendants (Rebecca Ann Durden, New York City, Of Counsel). MEMORANDUM AND ORDER OWEN, District Judge. The defendants in this case, the New York Board of Law Examiners and certain individually named officers of the Board, move to dismiss the complaint against them made by the plaintiff, Lissa Morrow Christian. Plaintiff graduated from the Law School of the City University of New York in 1993. The plaintiff applied for special accommodations in taking the bar examination[1] on the ground of being "learning disabled"specifically, that she had dyslexia (a reading impairment) and dysgraphia (a writing impairment). Plaintiff submitted documentation including reports from Doctors Florence Sisenwein and Rolland Parker, respectively a psychologist and a clinical professor of neuropsychology. In her application, she asked for the following accommodations: enlarged type exam questions, double time to write answers in the test booklets, use of a computer with a word processor and a spell-checking feature, a separate room so she could read aloud, scrap paper, and a room near the bathroom. The Board submitted her claim to Dr. Frank R. Vellutio, the Board's expert on disability who was responsible for evaluating all applications for accommodations. Dr. Vellutio, a professor of psychology, concluded however that her documentation did not support her claim of need and on his recommendation, the Board denied plaintiff special accommodations. New York State's Judiciary Law afforded plaintiff an opportunity to appeal this decision before the full Board. N.Y. Judiciary Law § 460-b (McKinney 1994). Plaintiff utilized this procedure, submitting further evidence, and the initial decision by the Board was upheld. Plaintiff did not take New York State's bar exam that summer. However, she applied to New Jersey. Plaintiff alleges that between the time of New York's denial and New Jersey's approval of accommodations, an officer of the New York Board of Law Examiners sent a copy of its letter denying accommodations to the Assistant Secretary for the New Jersey Board of Bar Examiners. Even 1256 if this happened, it was New Jersey's determination to grant plaintiff accommodations, and she passed. In December 1993, plaintiff again applied to take the New York State bar exam scheduled for February 1994, and again requested the same special accommodations. She submitted the same documentation as she did for the July 1993 exam, with the addition of a report written in the fall of 1993 by Dr. Richard Kovner, a clinical psychologist. The Board followed the identical review procedure that it used for the July 1993 exam, using Dr. Vellutio as its expert for evaluating the submissions by plaintiff. On February 3, 1994, the Board informed plaintiff that her application for accommodations was denied. However, the Board did agree to give plaintiff scrap paper and a room near the bathroom. Again, this decision was appealed to the full Board and upheld. On February 14, 1994, represented by counsel, plaintiff filed this complaint and moved for a preliminary injunction for special accommodations for the February 1994 exam. At the hearing before Judge Keenan, plaintiff brought in Drs. Sisenwein and Kovner who testified as to plaintiff's alleged disabilities. Plaintiff argued at the hearing on the motion that she could not take the bar exam without the accommodations and therefore would be irreparably harmed by having to wait until the civil action was decided on the merits (presumably in her favor) before she could take the exam, pass it, and begin to practice law. The motion for a preliminary injunction was denied by Judge Keenan on February 18, 1994. He essentially concluded that there was no showing of "irreparable harm" to the plaintiff because any injury to her career could be compensated by money damages. However, notwithstanding all this, plaintiff decided to, and did, take the February 1994 New York bar exam and passed. Although she passed the Bar, plaintiff continues to press her complaint on the theory that she is entitled to compensatory damages for mental distress and compensation for her expenses in preparing for the February 1994 exam. As I see it, while I am informed from outside of the complaint that plaintiff passed both the New York and New Jersey bar exams, I am not converting this into a motion for summary judgment and thus, I address no more than whether given this awareness, there is arguable life remaining in the complaint. The complaint has four causes of action. The first three are based on § 42 U.S.C. §§ 12189 and 12132, and 1983, and allege in essence that plaintiff was denied the opportunity to take the exam in a manner "accessible to" her (Count I), and that this denied her the "benefits of the Bar Examination" (Count II), and that it further "damaged [her] ability to an equal opportunity to be admitted to practice law in the State of New York" (Count III). Plaintiff succeeded on the examination and therefore I conclude that as a matter of law there is no longer any case or controversy remaining. While one might notor need notgo so far as to say that plaintiff's passing the exam demonstrated that the Board was correct in its assessment of the severity of her disabilities, it is certainly so that one could not, hereafter, permit a finding by a trier of the fact that the Board was wrong,[2] and therefore was liable to her for some amount of compensation. Thousands of law students from all law schools and backgrounds with greater or lesser skills face this exam each year with enormous anxiety and generally extraordinary preparation and related expense. Each year some fail and take it again. Plaintiff's fourth cause of action, a state law claim under New York Judiciary Law § 90(10) alleges that New York made an "unauthorized disclosure of plaintiff's accommodation request to the New Jersey Board of Law examiners",[3] thus "wantonly and wilfully 1257 interfering with plaintiff's rights". Having dismissed the federal claims, I decline to retain the state claim, here, too, noting that it appears moot; New Jersey granted her accommodations of some kind, and plaintiff passed the New Jersey exam. The complaint is accordingly dismissed. NOTES [1] The relevant rules governing the New York State Board of Law Examiners follow: Examination accommodations for applicants with disabilities. (a) The bar examination is intended to test all qualified candidates for knowledge and skills relevant to the practice of law. Accordingly, it is the policy of the New York State Board of Law Examiners to provide accommodations in testing conditions to candidates with disabilities during the administration of the examination, to the extent such accommodations are reasonable, consistent with the nature and purpose of the examination, and necessitated by the candidate's disability. * * * * * (f) For purposes of this section, the term disability shall mean a physical, neurological or learning disability, and the term candidates with disabilities shall mean otherwise qualified candidates having such disabilities. N.Y.Ct.Rules § 6000.4 (McKinney 1994). [2] The determination of the Board, as an administrative agency, is in any event entitled to some deference. 612 F.2d 644, 648 (2d Cir.1979). [3] Plaintiff's allegation that there was a "retaliatory" motive behind New York's alleged communication to New Jersey alleges no facts supporting any "evil" motive, even assuming such a letter was sent, which by itself would appear to be entirely proper.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2238862/	72 F. Supp. 21 (1947) BOEHLE v. ELECTRO METALLURGICAL CO. Civil Action No. 3412. District Court, D. Oregon. June 9, 1947. Harry George, Jr., and William A. Babcock, Jr., both of Portland, Or., for plaintiff. Gunther Krause, of Portland, Or. (of Krause & Evans of Portland, Or.) for defendant. McCOLLOCH, District Judge. The Portal-to-Portal Act of 1947, 29 U.S. C.A. §§ 251-263, is a case of "chickens come home to roost." In 1932 Congress passed the Norris-LaGuardia Act, 29 U.S.C.A. § 101 et seq., which withdrew jurisdiction from Federal Courts to issue injunctions in labor disputes. Now, Congress has withdrawn jurisdiction from Federal Courts to consider labor claims of the Portal-to-Portal type. Both the Norris-LaGuardia Act and the Portal-to-Portal Act were put in terms of restricting jurisdiction "to avoid constitutional questions." Both are procedural devices to avoid face-to-face conflict with substantive issues. Both are bad in principle; for, if on rising tides of public opinion the jurisdiction of Federal Courts can be tinkered with to suit the passions of the hour, the independence of the courts will be gravely impaired. The average judge will not venture outside old and well-charted waters, if he knows that Congress may revoke jurisdiction in the case, if dissatisfied with the way it is decided. In short, jurisdiction of the courts should not be a legislative football. Despite this view, I do not see how a Federal District Judge could hold this most recent tampering with jurisdiction to be unconstitutional, while at the same time upholding the constitutionality of the Norris-LaGuardia Act, as is required by countless decisions over the last fifteen years, including decisions of the Supreme Court. So, this case and others of the Portal-to-Portal type that have been assigned to me will be dismissed for want of jurisdiction.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2798047/	NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Submitted August 1, 2014 * Decided May 1, 2015 Before DIANE P. WOOD, Chief Judge DANIEL A. MANION, Circuit Judge DAVID F. HAMILTON, Circuit Judge No. 10-3835 PAMELA J. HARRIS, et al., On Remand from the Supreme Court of Plaintiffs-Appellants, the United States v. No. 10 cv 02477 BRUCE V. RAUNER, in his official Sharon Johnson-Coleman, capacity as Governor of the State of Judge. Illinois, et al., Defendants-Appellees. ORDER When this case was last before us, we held that plaintiffs, providers of in-home care for people with disabilities or health problems, did not have a First Amendment right to refuse to pay certain fair-share fees to a union. Harris v. Quinn, 656 F.3d 692 (7th * After examining the briefs and record, we have concluded that oral argument is unnecessary. Thus the appeal is submitted on the briefs and record. See FED. R. APP. P. 34(a)(2). No. 10-3835 Page 2 Cir. 2011). This had the effect of affirming the district court’s decision to dismiss Count I of the complaint, which presented claims on behalf of personal assistants to customers in the state’s Rehabilitation Program. (Count II, which we note briefly below, asserted similar claims on behalf of customers in the state’s Disabilities Program.) The Supreme Court then granted certiorari and concluded that our judgment had to be reversed in part and affirmed in part. Harris v. Quinn, 134 S. Ct. 2618 (2014). With respect to Count I, the Court held that the First Amendment does not permit a state “to compel personal care providers to subsidize speech on matters of public concern by a union that they do not wish to join or support.” Id. at 2623. It concluded that the state’s involvement in the terms and conditions of employment for the in-home personal assistants was not enough to make the state their employer. It stressed the customer’s control of the assistant’s location, training, day-to-day work, discipline, and other aspects of the employment relationship. That meant that this court’s conclusion that the case was governed by Abood v. Detroit Bd. Of Ed., 431 U.S. 209 (1977), was in error: Abood applies only to public-sector employees, and the Court declined to extend it to the circumstances presented in this case, where there is state involvement but fundamentally a private employment relationship. The Court thus reversed the decision to dismiss the claims of the plaintiffs who served customers in the Rehabilitation Program; it affirmed our ruling that the claims of plaintiffs who worked in the Disabilities Program (Count II) were not ripe. 134 S. Ct. at 2644 & n.30. As required by Seventh Circuit Rule 54, the parties were given an opportunity to address the proper next steps in light of the Supreme Court’s decision. They filed a joint statement, in which they recommended that (1) we reverse the district court’s decision to dismiss Count I of the complaint and remand that part of the case for further proceedings consistent with the Supreme Court’s opinion, and (2) we order the claims raised in Count II to be dismissed without prejudice. They also ask us to recognize that defendants-appellees Service Employees International Union (SEIU) Local 73 and American Federation of State, County and Municipal Employees (AFSCME) Council 31 are no longer defendants in the case. We agree with the parties that this is the appropriate way to respond to the Supreme Court’s ruling. In addition, there are some remaining questions about costs and fees. In keeping with the Joint Stipulation, we hereby award the Plaintiffs-Appellees 50% of their costs in this court pursuant to Circuit Rule 39. With respect to attorney’s fees, we believe that the parties’ first suggestion is preferable, namely, to include that issue in the matters remanded to the district court and to allow it to consider what fees Plaintiffs-Appellees No. 10-3835 Page 3 are entitled to recover for work done both in this court and before the Supreme Court. That proceeding may also include fees incurred for work done after remand. In summary, we hereby REVERSE the district court’s judgment dismissing Count I of the complaint; we REMAND the judgment dismissing Count II of the complaint so that the district court can modify it to be without prejudice; and we otherwise REMAND this case to the district court for further proceedings consistent with this order.	01-03-2023	05-01-2015
https://www.courtlistener.com/api/rest/v3/opinions/2850779/	COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 2-05-225-CV FINOVA CAPITAL CORPORATION APPELLANT V. JOE B. RUPE, O.D., P.C. AND JOE B. RUPE APPELLEES ---------- FROM THE 78TH DISTRICT COURT OF WICHITA COUNTY ---------- MEMORANDUM OPINION[1] AND JUDGMENT ---------- We have considered AAppellant, Finova Capital Corporation=s Motion To Dismiss.@ It is the court=s opinion that the motion should be granted; therefore, we dismiss the appeal. See TEX. R. APP. P. 42.1(a)(1), 43.2(f). Costs of the appeal shall be paid by the party incurring the same, for which let execution issue. PER CURIAM PANEL D: LIVINGSTON, DAUPHINOT, and HOLMAN, JJ. DELIVERED: January 26, 2006 [1]See Tex. R. App. P. 47.4.	01-03-2023	09-03-2015
https://www.courtlistener.com/api/rest/v3/opinions/1960168/	881 F. Supp. 574 (1995) Charles R. REYHER, Participant, Plaintiff, v. TRANS WORLD AIRLINES, INC., Administrator of the Directed Account Plan, Defendant. No. 94-918-Civ-T-17E. United States District Court, M.D. Florida, Tampa Division. April 3, 1995. 575 576 William D. Mitchell, Mitchell & Bline, P.A., Tampa, FL, for plaintiff. Sharyn Beth Zuch and Joseph W. Clark, Shackleford, Farrior, Stallings & Evans, P.A., Tampa, FL, for defendant. ORDER DENYING MOTION TO STRIKE KOVACHEVICH, District Judge. This cause is before the Court on Plaintiff's, Charles R. Reyher ("Reyher"), motion to strike affirmative defenses, filed August 30, 1994, (Docket No. 9) and response thereto, filed September 16, 1994, (Docket No. 12). Fed.R.Civ.P. 12(f) provides that, upon motion, the court may order stricken from a pleading an insufficient defense or an immaterial matter. However, a court will not exercise its discretion under the rule to strike a pleading unless the matter sought to be omitted has no possible relationship to the controversy, may confuse the issues, or otherwise prejudice a party. Poston v. American President Lines, Ltd., 452 F. Supp. 568, 570 (S.D.Fla.1978); Bazal v. Belford Trucking Co., 442 F. Supp. 1089, 1101 (S.D.Fla. 1977); Augustus v. Board of Public Instruction, 306 F.2d 862, 868 (5th Cir.1962). There are no hard and fast rules for determining what constitutes an insufficient defense. An affirmative defense will be held insufficient as a matter of law only if it appears that the defendant cannot succeed under any set of facts which it could prove. Equal Employment Opportunity Comm'n v. First Nat'l Bank, 614 F.2d 1004, 1008 (5th Cir.1980), cert. denied, 450 U.S. 917, 101 S. Ct. 1361, 67 L. Ed. 2d 342 (1981). To the extent that a defense puts into issue relevant and substantial legal and factual questions, it is "sufficient" and may survive a motion to strike, particularly when there is no showing of prejudice to the movant. Augustus, 306 F.2d at 868. In evaluating a motion to strike, the Court must treat all well pleaded facts as admitted and cannot consider matters beyond the pleadings. U.S. Oil Co., Inc. v. Koch Refining Co., 518 F. Supp. 957, 959 (E.D.Wis.1981). Plaintiff moves to strike Defendant's second affirmative defense which states the Plaintiff's action is barred by his failure to allege exhaustion of administrative remedies under the provisions of ERISA. However, as stated in the order dated November 10, 1993, where this Plaintiff moved to strike Defendant's affirmative defenses in Case No. 93-396-CIV-T-17, which is now consolidated with this case at hand, failure to exhaust administrative remedies is a sufficient defense. Binding case law in this circuit holds that a plaintiff must exhaust administrative remedies before suing under an ERISA plan. Mason v. Continental Group, Inc., 763 F.2d 1219, 1227 (11th Cir.1985), cert. denied, 474 U.S. 1087, 106 S. Ct. 863, 88 L. Ed. 2d 902 (1986). Exhaustion of administrative remedies is a jurisdictional defense that, if meritorious, results in an action being dismissed without prejudice prior to adjudication on the merits. Hutchinson v. Wickes Companies, Inc., 726 F. Supp. 1315, 1322 (N.D.Ga.1989). As stated in this Court's earlier order, it is a question of fact whether Plaintiff pursued the appeal procedures outlined in the employee benefit plan and, in any event, should Defendant prevail on this defense, Plaintiff would suffer no prejudice. To the extent that Defendant's second affirmative defense puts into issue relevant and substantial factual questions with no showing of prejudice to Plaintiff, the defense is sufficient. Next, Plaintiff moves to strike Defendant's third affirmative defense which alleges that the present action was brought for no other reason than to subject Defendant to vexatious and multiple litigation and is duplicative of the allegations the Plaintiff has *577 attempted to raise in the companion case. Also, the Plaintiff moves to strike Defendant's fourth affirmative defense that Plaintiff's claims are barred by collateral estoppel, waiver, laches, and unclean hands arising from discovery disputes in related litigation between the parties. Both of these affirmative defenses have a possible relationship to this controversy. The Defendant is entitled to prove any set of facts that would support its contentions and the Plaintiff has offered no legal basis or any supporting authority for striking either defense. Therefore, neither the third nor the fourth affirmative defenses of the Defendant should be stricken. In the sixth affirmative defense, the Defendant asserts that the Plaintiff has not been harmed by any alleged failure of the administrator to provide documents within the statutory time period. Although ERISA does not require that a plaintiff allege harm in an action such as this, the Defendant is entitled to a defense that puts into issue relevant and substantial legal and factual questions when there is no showing of prejudice to the movant. Moreover, it appears that the Defendant may be able to establish a set of facts regarding the retirement plan documents that would require that Plaintiff's motion to strike the sixth affirmative defense be resolved in Defendant's favor. Thus, the Court does not feel that the pleadings support Plaintiff's motion to strike Defendant's affirmative defense, that the Plaintiff has not been harmed, or that the Plaintiff will be prejudiced by the denial of the motion to strike. The last affirmative defense the Plaintiff moves to strike is Defendant's seventh affirmative defense which alleges the Plaintiff has no standing to bring this action since the Plaintiff has received a payout of his benefits and, thus, is no longer a participant under the plan as defined by ERISA. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S. Ct. 948, 957-58, 103 L. Ed. 2d 80 (1989), the Supreme Court looked at ERISA's definition of a participant and concluded that the term participant included employees in, or reasonably expected to be in, currently covered employment, or former employees who have a colorable claim. However, whether or not the Plaintiff is a participant, whether the Plaintiff's payments were the correct amount, and whether he has a colorable claim to some future benefits is a factual issue which is disputed and, therefore, this motion must be resolved in the Defendant's favor. Thus, the Defendant's seventh affirmative defense raises factual disputes that impact legal issues and this defense should not be stricken. Finally, the Plaintiff states that he has conferred with Defense counsel and that both parties concur on the striking of the word "amended" as it appears in Defendant's first affirmative defense. Accordingly, it is ORDERED that Plaintiff's motion to strike the word "amended" as it appears in Defendant's first affirmative defense be GRANTED. It is further, ORDERED that Plaintiff's motion to strike (Docket No. 9) Defendant's second, third, fourth, sixth, and seventh affirmative defenses be DENIED. DONE and ORDERED.	01-03-2023	10-30-2013
https://www.courtlistener.com/api/rest/v3/opinions/2986291/	Continuing Abatement Order filed August 1, 2013 In The Fourteenth Court of Appeals ____________ NO. 14-12-00167-CV ____________ VONDA BARNHART, Appellant V. SYLVIA MORALES AND LUIS PEREZ, Appellees On Appeal from the 157th District Court Harris County, Texas Trial Court Cause No. 2010-17655 CONTINUING ABATEMENT ORDER This is an appeal of a judgment in favor of Sylvia Morales and Luis Perez. On March 21, 2013, this court abated the case because notice was filed that Santa Fe Auto Insurance Company, which insures appellant, had been placed into receivership by the State of Texas. Subsequently, this court learned that Santa Fe Auto Insurance Company was declared insolvent and placed into liquidation by the 419th District Court of Travis County, Texas in cause no. D-1GV-13-000204. The Guaranty Act imposes an automatic six-month stay of this proceeding. Tex. Ins. Code § 462.309. Accordingly, we stay this appeal. The abatement of this appeal is continued until October 5, 2013, or until further order of this court. For administrative purposes only, and without surrendering jurisdiction, the appeal is abated and treated as a closed case until October 6, 2013, or further order of this court. PER CURIAM	01-03-2023	09-23-2015
https://www.courtlistener.com/api/rest/v3/opinions/3520288/	* Headnote 1. Frauds, Statute of, 27 C.J., Section 372. Appellant Mrs. Grace Rainey Rogers, executrix of the will of Paul J. Rainey, deceased, filed her bill in the chancery court of Tippah county to enjoin appellee Foley from the further use and occupation of a part of the lands of said estate. Appellee claimed the right to the use and occupation of the land in question by virtue of a written contract of lease for a term of more than a year entered into by him with one O.H. Purnell, claiming to act as authorized agent of said Paul J. Rainey in the execution of said lease. The principal question in the case, and the only one we deem necessary to discuss, is whether or not the lease involved was void under the statute of frauds, section 4775, Code of 1906; section 3119, Hemingway's Code. The cause was heard on bill, answer, and proofs, and a decree rendered dissolving the temporary injunction issued in the cause and dismissing the bill and awarding Page 333 appellee damages for the wrongful suing out of the injunction. There was sufficient evidence to sustain the finding of fact by the chancellor that Purnell, who executed the lease in question on behalf of the testate Paul J. Rainey, had been authorized by the latter so to do. It was undisputed, however, that the authority of the agent Purnell was verbal and not written. Appellant's position is that under the statute of frauds it was not only necessary for the lease to be in writing, but if executed by an agent, and not by the lessor in person, it was necessary for the authority of the agent to so execute the lease to be in writing signed by his principal. The applicable part of the section of the statute of frauds provides, in substance, that an action shall not be brought whereby to charge a defendant, or other party, upon a contract for the lease of land for a longer period than one year unless the promise or agreement upon which such action may be brought or some memorandum or note thereof shall be in writing (quoting the statute), "and signed by the party to be charged therewith orsome person by him or her thereunto lawfully authorized." (Italics ours.) The decisions of the courts in those jurisdictions, construing statutes of frauds expressly requiring the authority of the agent to be in writing signed by the principal, have no application to our statute which has no such requirement. Story on Agency lays down the rule that an agent may be appointed by parol; that this was absolutely indispensable to the exigencies of business, "otherwise the most ordinary transaction would be greatly embarrassed if not obstructed." Story on Agency (9th Ed.), section 47. It is useless, however, to discuss the authorities elsewhere. The question is foreclosed by the decisions of this court. In the absence of a provision in the statute requiring that the authority of the agent executing the contract on behalf of his principal be in writing and signed by the latter, the common-law rule prevails, and that is that the authority of the agent to sign the writing on behalf of the principal may Page 334 rest in parol. Curtis v. Blair, 26 Miss. 322, 59 Am. Dec. 257; Lobdell v. Mason, 71 Miss. 937, 15 So. 44; Hopper v.McAllum, 87 Miss. 441, 40 So. 2; Hutchinson v. Platt,119 Miss. 607, 81 So. 281. Affirmed.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/3520290/	The appellant was tried in the circuit court of Grenada county on an indictment for the murder of one Gene Clarady, convicted of manslaughter, and sentenced to serve a term of ten years in the state penitentiary. The killing occurred at a dance on July 7, 1935. It is unnecessary to set out with particularity the facts in the case since they were conflicting, and, under the evidence, Page 456 the jury could have returned a verdict of murder, manslaughter, or a verdict of not guilty. On the part of the state, there was evidence that a son of the deceased was being cut with a knife by Bailey and cried out that they were cutting him to death, or some remark of like effect; that Gene Clarady ran up and there was some sort of scrimmage or struggle in which he was cut with a knife, from which wound he died in a few minutes. On the part of the defendant, the appellant here, there was evidence that he was being assaulted by Gene Clarady's son and pinioned against the wall when Gene Clarady came into the difficulty, and that in resisting the assault he used his knife in trying to free himself from his persecutors, deeming himself to be in great bodily danger. There was evidence that neither Gene Clarady, nor his son were armed or making any attempt to use weapons. It is contended that the following instruction given for the state is erroneous, and that because thereof, the case should be reversed: "The court charges the jury for the state that to make a homicide justifiable, the danger to the slayer must be either actual, present and urgent, or the slayer must have reasonable grounds to apprehend a design on the part of the deceased to kill him or to do him some great bodily harm, and in addition to this, that there was imminent danger of such design being accomplished, and hence mere fear, apprehension or belief, however sincerely entertained by one person, that another designs to take his life will not justify the former in taking the life of the latter party. A party must have a lively apprehension that his life is in danger and believe the grounds of his apprehension just and reasonable, and yet he acts at his peril. He is not the final judge, the jury may determine the reasonableness of the grounds upon which he acted." It is contended that this language cuts off from the consideration of the jury the danger of bodily harm apprehended Page 457 by the appellant. In our opinion, the instruction is not reversible error, and while it is not full and complete, and, if standing alone, might mislead, still when considered with the instructions given for the appellant, and all the instructions considered as a whole, as they must be, no reversible error was committed. For instance, the appellant procured the following instruction: "The court instructs the jury for the defendant (appellant) that if they believe from the evidence, or have a reasonable doubt from the evidence, that the deceased was joined in his unjustifiable attack on the defendant by one or more of the sons of the deceased, then the defendant had the right to repel the said attack and to strike and wound and kill with a deadly weapon, if really or apparently necessary to protect himself from death or great bodily harm from the attack of the deceased or those in concert with the deceased in the attack on the defendant." Other instructions also carried the idea to the jury that they could rely upon the appearance of great bodily harm, and that the appellant could defend himself against any attack reasonably apparent. We do not think this case can be reversed for the giving of these instructions. It is next contended that it was error for the state to procure the following instruction given it: "The court charges the jury for the state that the mere fact, if it be a fact, that the defendant was a smaller man the deceased, and of less powerful build and proportions, and was being assaulted by the deceased and his son with their hands and fists at the time of the fatal difficulty, and was being beaten without excuse or provocation, does not and cannot in law excuse or justify the defendant in taking the life of the deceased." If this instruction stood alone, under the facts in this case, it would be reversible error under the doctrines announced in Hill v. State, 94 Miss. 391, 49 So. 145, wherein Page 458 it was held to be error to refuse the instructions there set forth giving the defendant the right to use a weapon to repel an attack of a character likely to result in great bodily harm or death. In this case at bar, however, the appellant procured the following instruction: "The court instructs the jury that it is not the law that the defendant must have been resisting an attack with a deadly weapon by the deceased or others at the time the fatal blow was struck. The court instructs the jury that if the deceased was a much larger and stronger man than the defendant, and if the deceased was joined in the attack on defendant by one or more of his sons, so much so that the defendant was wholly and absolutely incapable of offsetting the said attack, and was liable to receive serious and great bodily injuries at the hands of the deceased, or his son or sons, then the defendant was justified in using a deadly weapon to protect himself from the deadly attack of the deceased, even though the deceased was wholly unarmed, and the defendant was in no danger from the deceased except such as might be inflicted by the deceased with his hands or feet; and if the jury have a reasonable doubt as to the occurrence being as above stated, they will acquit the defendant and find him not guilty." In this instruction the rights of the appellant were announced, and this brings the case at bar squarely within the case of Moore v. State, 144 Miss. 649, 110 So. 216. Taking all the instructions as an entirety, the jury was clearly informed of the rights of the appellant to repel an assault. We cannot believe that the jury was misled in respect to the rights of the appellant under the law upon this proposition; but we deem it proper to warn the district or prosecuting attorneys against the effect of these principles, especially where there are facts in evidence which, if believed, would make the giving of certain instructions inapplicable. There are many circumstances that arise from time to Page 459 time making it necessary for a person to resist an assault being made against him of a nature likely to cause great bodily harm or death by a person of superior strength, and to use a weapon in such resistance. We find no reversible error in the record, and the judgment will be affirmed. Affirmed.	01-03-2023	07-05-2016
https://www.courtlistener.com/api/rest/v3/opinions/4034690/	ENTRY ORDER SUPREME COURT DOCKET NO. 2014-396 SEPTEMBER TERM, 2016 Carole Kuligoski, Individually and On Behalf of } APPEALED FROM: Michael J. Kuligoski, and Mark Kuligoski and } James Kuligoski } } Superior Court, Windham Unit, v. } Civil Division } Brattleboro Retreat and Northeast Kingdom } Human Services } DOCKET NO. 47-2-14 Wmcv In the above-entitled cause, the Clerk will enter: An amended opinion has been issued in this case in response to motions for reargument. The opinion issued May 6, 2016, Kuligoski v Brattleboro Retreat, 2016 VT 54, is withdrawn and replaced by an amended opinion, Kuligoski v Brattleboro Retreat, 2016 VT 54A. The State of Vermont’s motion to file for reargument as amicus curiae is granted. Appellees’ and amici curiaes’ motions for reargument are denied. REIBER, C.J. and SKOGLUND, J. dissenting. After this opinion first issued in May 2016, the Court received an astonishing number of motions for reargument—from the parties, amici, and not least the State of Vermont, Agency of Human Services—urging the majority to reconsider its decision to impose a new, ill-defined, and unprecedented duty of care on mental health care providers in the State of Vermont. The State’s motion is especially noteworthy because it represents neither a party to the case nor one of the many amicus curiae invested in its outcome, but rather the broader interests of health care patients and their families statewide. The State’s clear and dispassionate analysis of both the immediate and long term damage resulting from the majority’s misguided judgment is essential reading for anyone interested in the subject. While far too nuanced to summarize adequately, the State’s view is captured in its introduction, which is well worth quoting in full: The Court’s May 6, 2016 decision imposes on mental health care providers a “duty of care to provide sufficient information” to a patient’s “caretakers” so those individuals can “fully assume their caretaker responsibilities to assist [the patient] and protect against any harmful conduct in which he might engage. . . . “ The ambiguous scope of this new duty creates the very real risk that providers—facing uncertain liabilities and potentially conflicting legal obligations—will err on the side of providing treatment in more restrictive settings and making more requests for involuntary treatment. The ruling thus has immediate and potentially far- reaching consequences for Vermont’s system of care. It may also deter family members and others from helping to care for those with mental illness. . . . The Court should vacate the opinion and reconsider its decision to adopt this novel duty of care. Unfortunately, although the majority has made changes to “narrow” its holding, the changes are entirely inadequate to address the harm identified by the State: the majority’s failure to recognize that it has created and imposed on mental health care providers a duty so ill-defined and uninformed that even the best, and the best-intentioned, providers will be confused and conflicted as to their professional obligations. Ironically, although the majority clearly believes that its decision represents progressive thinking, it is at odds with the real interests of Vermont’s health care providers, patients, and the public at large. The State is correct; the Court should grant the several motions for reargument, vacate its decision, and reject this novel duty. FOR THE COURT: John A. Dooley, Associate Justice Dissenting: Concurring: _____________________________________ Paul L. Reiber, Chief Justice Beth Robinson, Associate Justice _____________________________________ Marilyn S. Skoglund, Associate Justice Walter M. Morris, Jr., Superior Judge (Ret.), Specially Assigned 2 NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press. 2016 VT 54A No. 2014-396 Carole Kuligoski, Individually and On Behalf of Supreme Court Michael J. Kuligoski, and Mark Kuligoski and James Kuligoski On Appeal from Superior Court, Windham Unit, v. Civil Division Brattleboro Retreat and Northeast Kingdom May Term, 2015 Human Services John P. Wesley, J. Richard T. Cassidy and Matthew M. Shagam of Hoff Curtis, Burlington, for Plaintiffs-Appellants. Ritchie E. Berger and Angela R. Clark of Dinse, Knapp & McAndrew, P.C., Burlington, for Defendant-Appellee Brattleboro Retreat. Stephen J. Soule and Pamela L. Eaton of Paul Frank + Collins P.C., Burlington, for Defendant-Appellee Northeast Kingdom Human Services. Joslyn L. Wilschek and Shireen T. Hart of Primmer Piper Eggleston & Cramer PC, Montpelier, for Amicus Curiae The Vermont Association of Hospitals and Health Systems. O. Whitman Smith of Mickenberg, Dunn, Lachs & Smith, PLC, Burlington, for Amicus Curiae Vermont Council of Developmental and Mental Health Services, Inc. Allan R. Keyes of Ryan Smith & Carbine, Ltd., Rutland, for Amici Curiae University of Vermont Medical Center, Central Vermont Medical Center and Rutland Regional Medical Center. A.J. Ruben, Montpelier, for Amicus Curiae Disability Rights of Vermont, Inc. PRESENT: Reiber, C.J., Dooley, Skoglund and Robinson, JJ., and Morris, Supr. J. (Ret.), Specially Assigned ¶ 1. DOOLEY, J. This case arises out of the assault of Michael Kuligoski by a former Brattleboro Retreat patient, E.R., after the patient was discharged from the Retreat, a mental health 3 treatment facility, and while he was undergoing outpatient treatment with Northeast Kingdom Human Services (NKHS). Plaintiff Carole Kuligoski, individually and on behalf of Michael, Mark Kuligoski, and James Kuligoski (collectively plaintiffs), filed suit in Windham Superior Court against defendants Brattleboro Retreat and NKHS, raising claims of failure to warn of E.R.’s danger to others, failure to train E.R.’s parents in handling E.R., failure to treat, improper release, and negligent undertaking. The superior court granted defendants’ motions to dismiss for failure to state a claim, and plaintiffs appealed. We reverse on the failure to warn claim and train claims, and affirm on the failure to treat, improper release, failure to train, and negligent undertaking claims. ¶ 2. Plaintiffs’ complaint alleges the following facts,1 as relevant to this appeal. On October 9, 2010, E.R. was voluntarily admitted to the Psychiatric Department at Central Vermont Medical Center (CVMC) with a “psychotic disorder” after having threatened young children in his home. During his first few days at CVMC, E.R. was easily agitated, made threatening remarks, reported auditory hallucinations, and had fair-to-poor judgment. The examining physician tentatively diagnosed E.R. with a schizophreniform disorder. ¶ 3. On October 15, 2010, the medical professionals at CVMC completed the necessary documents to have E.R. involuntarily committed. The documents stated that he was mentally ill, posed a danger to himself and others, and was in need of involuntary hospitalization. The following day, E.R. was placed in restraints and transferred from CVMC to the Vermont State Hospital where a physician examined him and determined that he was a danger to others and, if released, would pose a danger to his family. There is no indication that either the documents Plaintiffs also brought an action against E.R., E.R.’s parents and E.R.’s grandparents 1 seeking the same damages they seek in this action. See Kuligoski v. Rapoza, No. 42-2-113 Cacv (Vt. Sup. Ct. May 13, 2015). The superior court in that case granted summary judgment for defendants and dismissed the action on May 13, 2015. The parties have stipulated that we can use the decision in that case in deciding this appeal. We take that stipulation to mean that we can consider the undisputed facts as considered in that decision in addition to the factual allegations made in the complaint in this case. The statement of facts in the body of this opinion is based on both sources. 4 prepared at CVMC or the determination of the physician at the Vermont State Hospital were ever used to start a formal involuntary commitment proceeding. Nor is there an explanation of the basis on which E.R. continued to be held at the Vermont State Hospital. We can conclude only that E.R. must have been held as a voluntary patient.2 ¶ 4. While at the Vermont State Hospital, E.R. was administered anti-psychotic and anxiety medication. He repeatedly asked to leave the hospital, once tried to escape, threatened to punch out a window, and, although he denied having auditory hallucinations, was observed reacting to unseen stimuli. After E.R. reported feeling unsafe at the hospital, a social worker made a referral for his transfer to the Retreat, a nonprofit psychiatric hospital in Windham County, Vermont. Upon his discharge from the state hospital, he was diagnosed with schizophreniform disorder. ¶ 5. On October 22, 2010, E.R. was examined by a physician at the Retreat who confirmed the state hospital’s diagnosis. The physician reported that E.R. “had verbalized homicidal ideation toward staff.” E.R. was thereafter placed on a staff-intensive treatment plan but continued to exhibit “grossly psychotic” behavior, lack of insight, and severely impaired judgment. His physician noted that he “required an in-patient level of care to prevent further 2 Without filing an application in the superior court for involuntary treatment or accepting E.R. as a voluntary patient, the Vermont State Hospital could only hold E.R. for seventy-two hours after the physician’s certification. See 18 V.S.A. § 7508(d). Since no court order was sought, we conclude that E.R. must have been considered a voluntary patient. Although the record does not show conclusively whether E.R. was an adult, the facts indicate that his symptoms first arose in 2009 at the beginning of his sophomore year in college and his hospital treatment occurred over a year later. It is very likely he was an adult, but was still living with his parents. In the text, we have considered him to be an adult. We recognize that his status as a voluntary patient seems inconsistent with some of the later facts, including his attempt to escape from the Vermont State Hospital. Inconsistencies of this type are not unusual in a complaint. 5 decompensation.”3 Further reports indicate auditory and visual hallucinations, menacing behavior, and homicidal and suicidal ideation. ¶ 6. On November 1, 2010, E.R.’s physician noted that “E.R. continued to be floridly psychotic, probably paranoid, guarded and gradually improving but that he remained sufficiently ill that he totally lacked insight into his illness and that E.R. would be non-compliant with treatment outside of the hospital.” He further noted that E.R. would remain on the treatment plan and be allowed out only for brief intervals. ¶ 7. During his time at the Retreat, E.R.’s behavior did not improve. In his November 10, 2010 assessment, E.R.’s physician stated that, if discharged, E.R. would be a high risk for decompensation, might stop his medication, and might not participate in aftercare treatment. Nevertheless, he stated that E.R. would be discharged on November 12. ¶ 8. On November 12, 2010, E.R.’s physician noted that he stopped taking his medication and had been hearing voices commanding him to kill himself. E.R. said of the commands, “I feel like I should do it.” His physician wrote in his assessment, “Obviously [E.R.’s] refusal of medications is very worrisome and exactly what this writer was concerned about. Not only abstractly is it a bad idea, but he actually seems to have experienced an increase in his voices with only missing one night’s medications.” E.R. was, however, discharged that same day. ¶ 9. Throughout the period of his treatment at both the Vermont State Hospital and the Retreat, E.R. was closely monitored by his parents, with whom he had been living. Exactly what the parents were told at the time of discharge is disputed, although it appears they were told that E.R. “might have schizophrenia.” They understood that E.R. was “going through a phase and would recover.” 3 In psychiatry, decompensation constitutes the “failure to generate effective psychological coping mechanisms in response to stress, resulting in personality disturbance or disintegration, especially that which causes relapse in schizophrenia.” Oxford English Dictionary (Oxford Univ. Press 2015), https://perma.cc/B6FR-VVF8. 6 ¶ 10. In the discharge summary, E.R.’s physician again stated that E.R. was a high risk for poor compliance with post-discharge treatment; E.R. had been diagnosed as having a “psychotic disorder, not otherwise specified”; and that E.R.’s parents believed his mental health was related to his breakup with a girlfriend in 2009 or possibly a sequela resulting from mononucleosis. He stated that E.R. met the criteria for schizophrenia or, at the very least, schizophreniform disorder. ¶ 11. Prior to E.R.’s discharge, the Retreat developed an aftercare treatment plan with E.R.’s parents that involved regular visits to NKHS. E.R. was also prescribed daily medication, which his mother was told to administer to him. E.R.’s mother believed that E.R.’s condition had considerably improved at the time of his release. ¶ 12. On December 1, 2010, E.R. met with a treatment team at NKHS and signed a cognitive remediation therapy plan. A week later, a member of the treatment team completed a Substance Abuse Addendum, in which he stated “that E.R. was a high risk for Dimension 3 of the Client Placement Criteria (emotional, behavioral or cognitive conditions/complications) because E.R. had recently been diagnosed with a psychotic disorder and had minimal insight surrounding the diagnosis.” ¶ 13. In mid-December, E.R. told his mother that he had stopped taking his medication. She called NKHS and spoke with one of the physicians on E.R.’s treatment team. The physician told E.R.’s mother that this was a cause for concern but that E.R. had to decide to take care of himself. E.R. did not meet with anyone at NKHS between mid-December 2010 and March 2011, and no one at NKHS reached out to E.R. during that time or took any action with respect to E.R.’s medication regime. ¶ 14. On February 26, 2011, E.R. accompanied his father to an apartment building in St. Johnsbury owned by E.R.’s grandparents. Plaintiff Michael Kuligoski was also at the apartment building, working on the furnace. E.R. went down to the basement where Mr. Kuligoski was working and assaulted him, causing serious injuries. The forensic psychiatrist who evaluated E.R. 7 at the request of the criminal court stated that the night before the offense E.R. had not slept well, awoke early that morning, was just “sitting and staring,” and was paranoid that people were staring at him en route to the apartment. The psychiatrist believed that E.R. likely was in a “psychotic haze” at the time of the offense, having been “overcome by the symptoms of his condition to the degree where he acted while in a psychotic storm.” ¶ 15. Plaintiffs filed a complaint in superior court, alleging seven counts: (1) the Retreat was negligent in discharging E.R. knowing of his dangerous tendencies and that he was a high risk for decompensation; (2) the Retreat was negligent in failing to warn E.R.’s parents that he posed a risk to the general public; (3) the Retreat was negligent in failing to train E.R.’s parents how to supervise him, monitor and manage his medications, and take necessary and appropriate measures to protect potential victims; (4) the Retreat was negligent in its undertaking “to render a service that it recognized or should have recognized as necessary for the protection of third persons”; (5) NKHS was negligent in failing to warn E.R.’s parents that he posed a risk to the general public; (6) NKHS was negligent in failing to take “immediate and affirmative steps” to treat E.R.; and (7) NKHS was negligent in undertaking its duty to render services to E.R. Although the complaint itemized separate counts, plaintiffs emphasized in the superior court, as well as in this Court, that the counts were based on a common “duty of reasonable care to act to avoid needless risk to the safety of third parties” based on the “special relationship” that existed between the Retreat and NKHS and their patient, E.R. ¶ 16. Defendants moved to dismiss the respective claims against them, pursuant to Vermont Rule of Civil Procedure 12(b)(6). They both argued that they owed no duty to protect plaintiffs from attack by E.R. and that their alleged negligence was not the proximate cause of plaintiffs’ injuries. The superior court granted both motions. Relying largely on our decision in Peck v. Counseling Service of Addison County, Inc., 146 Vt. 61, 499 A.2d 422 (1985), the superior court concluded that defendants owed no duty to plaintiffs because Michael Kuligoski was not an identifiable victim and defendants were under no duty to control E.R. With respect to the third- 8 party duty, the court explained that plaintiffs’ claims “would push the ruling by the Peck majority far beyond the bounds of the holding as limited by the facts there, and the recognition of those claims would stake out expansive new territory not warranted by proper respect for the separation of powers.” As to the duty of defendants to control E.R., the court emphasized Vermont’s “policy of keeping mentally-ill persons in the least restrictive environment possible.” This appeal followed. ¶ 17. On appeal, plaintiffs generally argue that the superior court erred in holding that Peck barred its claims. They contend that, while Peck involved an identifiable victim, its holding should not be read as limiting its reach only to identifiable victims. They argue that this reading is supported by public policy protecting the public from dangerous individuals and is consistent with modern tort scholarship, such as the Restatement (Third) of Torts: Liability for Physical and Emotional Harm § 41 (2012). Plaintiffs argue that the trial court erred in concluding at this stage of the case that there was no proximate cause. As we explain in our discussion below, we hold that Peck and other precedents bar plaintiffs’ duty-to-treat and negligent-undertaking claims. However, we also hold that Peck extends to identifiable and foreseeable victims, and that plaintiffs’ duty-to-warn claims should not be dismissed at this stage in the litigation. ¶ 18. We review the superior court’s decision “on a motion to dismiss de novo under the same standard as the trial court and will uphold a motion to dismiss for failure to state a claim only if it is beyond doubt that there exist no facts or circumstances that would entitle the plaintiff to relief.” Birchwood Land Co. v. Krizan, 2015 VT 37, ¶ 6, 198 Vt. 420, 115 A.3d 1009 (quotation omitted). “We assume as true all facts as pleaded in the complaint, accept as true all reasonable inference[s] derived therefrom, and assume as false all contravening assertions in the defendant’s pleadings.” Id. We are “limited to determining whether the bare allegations of the complaint are sufficient to state a claim.” Id. (quotation omitted). 9 I. The Duty of Care ¶ 19. “The existence of a duty is a question of law to be decided by the Court.” Sorge v. State, 171 Vt. 171, 174, 762 A.2d 816, 819 (2000). Once a legal duty is established, as well as breach of that duty, there must be factual causation for the defendant to be subject to liability for the harm caused to the plaintiff. See id. (requiring duty before determining causation). “Ordinarily, proximate cause is a jury issue unless the proof is so clear that reasonable minds cannot draw different conclusions or where all reasonable minds would construe the facts and circumstances one way.” Estate of Sumner v. Dep’t of Soc. & Rehab. Servs., 162 Vt. 628, 629, 649 A.2d 1034, 1036 (1994) (mem.) (quotation omitted). On this motion to dismiss, some factual development is necessary to reach the causation issue and determine whether, in light of any possible duty and breach of that duty, there could be proximate cause sufficient for liability. ¶ 20. Before addressing the specific issues, we start with a discussion of the duty to third parties generally, as well as the specific duty of mental health professionals to their patients and nonpatient third parties. In doing so, we note that the main issues in this case do not arise from a dispute as to whether defendants had a general duty of care, or even whether that duty extends to nonpatients in appropriate circumstances, but rather to the specific elements of that duty. Thus, we are starting at the most general level where there is only limited disagreement between the parties, and moving to more specific levels where the sharp disagreement emerges. As we have repeatedly stated, background principles of negligence provide that “duty is not sacrosanct in itself, but only ‘an expression of the sum total of those considerations of policy which lead the law to say that the plaintiff is entitled to protection.’ ” Sorge, 171 Vt. at 177, 762 A.2d at 820 (quoting W. Prosser & W. Keeton, The Law of Torts § 53, at 358 (5th ed. 1984)). The existence of a duty is “a question of fairness” and “involves a weighing of the relationship of the parties, the nature of the risk, and the public interest in the proposed solution.” Id. (quotation omitted). ¶ 21. The modern law on duty comes from the Restatement (Third) of Torts: Liability for Physical and Emotional Harm § 41 (2012), which provides: 10 (a) An actor in a special relationship with another owes a duty of reasonable care to third parties with regard to risks posed by the other that arise within the scope of the relationship. (b) Special relationships giving rise to the duty provided in Subsection (a) include: ... (4) a mental-health professional with patients. This Restatement section replaces three sections of the Restatement (Second) of Torts (1965), which have been used extensively in defining the duty owed by a mental health professional or institution to third parties injured by a patient. See id. §§ 315(a), 319, 324A. ¶ 22. Comment g to § 41 of the Third Restatement addresses the duty of mental health professionals to third parties. The duty begins with the physician using “customary care” to determine whether a patient poses a risk of harm to others. “Once such a patient is identified, the duty imposed by reasonable care depends on the circumstances” and “may require providing appropriate treatment, warning others of the risks posed by the patient, seeking the patient’s agreement to a voluntary commitment, making efforts to commit the patient involuntarily, or taking other steps to ameliorate the risk posed by the patient.” Id. Although courts have been hesitant to embrace duties any broader than those to “reasonably identified” victims, § 41 sets no express limit on individuals to whom the duty is owed. Because “[r]easonable care itself does not require warning individuals who cannot be identified,” the proper inquiry is “a question of reasonable care, not a question of the existence of a duty.” Id. “However, when reasonable care requires confining a patient who poses a real risk of harm to the community, the duty of the mental- health professional ordinarily extends to those members of the community who are put at risk by the patient.” Id. Because patients who are not in custody cannot be controlled in the traditional understanding of the term, the duty imposed on mental-health professionals “is only one of reasonable care.” Id. Despite this duty, a “health-care professional can pursue, and may have a 11 statutory obligation to seek, involuntary commitment of patients who are dangerous to themselves or others.” Id. ¶ 23. We have not had the occasion to address § 41(b)(4), and no other court has explicitly adopted it. Nonetheless, we note that the principles enunciated in § 41 build upon those of § 315 et seq. of the Second Restatement, and are an evolution of the duties articulated in decades of case law. ¶ 24. The history of this duty of care of mental health professionals or institutions with respect to nonpatient third parties begins with the California Supreme Court’s decision in Tarasoff v. Regents of University of California, 551 P.2d 334 (Cal. 1976). This landmark case established that mental health professionals have a duty to warn “would-be” victims of a patient’s dangerous conduct. Id. at 346. In Tarasoff, a patient at the University of California’s Cowell Memorial Hospital informed his therapist that he was planning to kill an unnamed girl—readily identifiable to the therapist as the victim Tatiana Tarasoff—after she returned from her summer in Brazil. Id. at 341. Although the mental health staff sought the authority to petition for the patient’s commitment, the university police took the patient into custody briefly and released him after he promised to stay away from the victim. Id. Shortly after Tarasoff’s return, the patient went to her residence and killed her. Id. ¶ 25. Tarasoff’s parents filed a negligence suit against the university, the psychotherapists employed by the university hospital, and the campus police claiming that the defendants owed a duty to protect their daughter from the patient and breached that duty by failing to warn the plaintiffs of the patient’s threats and failing to confine the patient under a California statute that governs the involuntary commitment of individuals with mental health disorders. The California Supreme Court concluded that the defendants were shielded by governmental immunity from liability under the statute for failing to confine the patient, and addressed only the merits of the duty-to-warn claim. Id. at 341-42. 12 ¶ 26. In conducting its analysis into the defendants’ duty to warn, the California court balanced a number of considerations, including the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved. Id. at 342 (quotation omitted). Although foreseeability is a significant factor, the court noted that, in avoiding foreseeable harm, a defendant will not be required to control the conduct of another person or warn of such conduct unless “the defendant bears some special relationship to the dangerous person or to the potential victim.” Id. at 343. The court then concluded that a special relationship existed between a therapist and patient, and that “[s]uch a relationship may support affirmative duties for the benefit of third persons.” Id. The court found that the interest in protecting a potential victim who has been threatened by a patient outweighs the countervailing policy considerations, such as doctor-patient confidentiality, the difficulty of predicting a patient’s future violent acts, and the risk of unnecessary warnings. Id. at 345-46. ¶ 27. Importantly, while the court observed that its prior decisions recognizing such a duty involved situations where the defendant maintained a special relationship with both the victim and the person whose conduct created the danger, see, e.g., Johnson v. State, 447 P.2d 352, 355 (Cal. 1968) (upholding suit against state for failure to warn foster parents of dangerous tendencies of child), it concluded the duty should not “logically be constricted to such situations.” Id. at 344. As guidance, the court cited cases from other jurisdictions recognizing such a duty in the context of doctors failing to warn their patients not to drive when taking certain medications for the safety of the general public, or failing to warn the family members of patients with contagious diseases. Id. 13 ¶ 28. As the California Supreme Court summarized: [The] defendant therapists cannot escape liability merely because [the victim] herself was not their patient. When a therapist determines, or pursuant to the standards of his profession should determine, that his patient presents a serious danger of violence to another, he incurs an obligation to use reasonable care to protect the intended victim against such danger. The discharge of this duty may require the therapist to take one or more of various steps, depending upon the nature of the case. Thus it may call for him to warn the intended victim or others likely to apprise the victim of the danger, to notify the police, or to take whatever other steps are reasonably necessary under the circumstances. Id. at 340. In summary, Tarasoff held that a therapist has a duty to warn either “the endangered party or those who can reasonably be expected to notify him.” Id. at 347. ¶ 29. On the heels of Tarasoff came the California Supreme Court’s decision in Thompson v. County of Alameda, 614 P.2d 728 (Cal. 1980), which further articulated the duty to warn when a potentially dangerous individual makes a generalized threat to the general public or a segment of the population—i.e., an unidentifiable victim. In Thompson, a juvenile offender had been in the custody of a county institution under a court order. Id. at 730. After he was released on temporary leave into his mother’s custody, he murdered a neighboring child in the garage of his mother’s home. Id. The complaint alleged that the county knew of the juvenile’s “latent, extremely dangerous and violent propensities regarding young children and that sexual assaults upon young children and violence connected therewith were a likely result of releasing (him) into the community.” Id. The complaint also alleged that the county knew the juvenile offender “had indicated that he would, if released, take the life of a young child residing in the neighborhood,” although he gave no indication of any specific child he intended to harm. Id. ¶ 30. The plaintiffs, the parents of the victim, claimed that the county was negligent in releasing the juvenile into the community and failing to warn the juvenile’s mother, the local police, or “parents of young children within the immediate vicinity” of his mother’s residence. Id. In deciding the extent of the duty, the court turned to Tarasoff, emphasizing that the holding extended to “specifically foreseeable and identifiable victim[s] of the patient’s threats.” Id. at 734. 14 The court also reiterated Tarasoff’s words of caution—that “ ‘the open and confidential character of psychotherapeutic dialogue encourages patients to express threats of violence, few of which are ever executed’ ” and that “ ‘a therapist should not be encouraged routinely to reveal such threats’ ” because “ ‘such disclosures could seriously disrupt the patient’s relationship with his therapist and with the persons threatened.’ ” Id. (quoting Tarasoff, 551 P.2d at 347). The court also cautioned that a therapist should not disclose confidential information unless necessary to avert danger and that “ ‘even then that he do so discreetly, and in a fashion that would preserve the privacy of his patient to the fullest extent’ ” possible. Id. (quoting Tarasoff, 551 P.2d at 347). The Thompson court interpreted Tarasoff to require as a precondition of liability that the victim be “readily identifiable,” if not “specifically named.” Id. The court thus rejected the plaintiffs’ attempt to impose “blanket liability” on the county for failing to warn the parents of the victim or other neighborhood children, the police, or the juvenile’s mother. Id. The court based its decision on policy considerations, as well as “foreseeability” within the context of the case. Notably, the court considered the “practical obstacles” to imposing a broad duty: In our view, the generalized warnings sought to be required here would do little to increase the precautions of any particular members of the public who already may have become conditioned to locking their doors, avoiding dark and deserted streets, instructing their children to beware of strangers and taking other precautions. By their very numbers the force of the multiple warnings required to accompany the release of all probationers with a potential for violence would be diluted as to each member of the public who by such release thereby becomes a potential victim. Such a warning may also negate the rehabilitative purposes of the parole and probation system by stigmatizing the released offender in the public’s eye. Id. at 736. ¶ 31. Thus, the court found that warnings to both the police and the parents of neighborhood children would be of little beneficial effect. Id. As specifically relevant to this case, the California high court considered the effect of warnings to the juvenile offender’s mother, into whose custody he was released. Id. at 737. The court concluded that such a warning would not 15 have the desired effect of warning the potential victims because the mother would not be likely to volunteer information to neighborhood parents that her son posed a threat to their welfare, “thereby perhaps thwarting any rehabilitative effort, and also effectively stigmatizing both the mother and son in the community.” Id. The court did not find persuasive the dissent’s reasoning “that the mother ‘might’ have taken special care to control her son had she been warned of [his] threats,” concluding that such “attenuated conjecture” cannot alone support the imposition of liability. Id. The court distinguished Johnson, 447 P.2d at 355, which held that the state had a duty to warn the foster family of a child’s dangerous tendencies, because it was the family in Johnson that was endangered, whereas the mother in Thompson was not herself endangered and would be expected to supervise her son “for the remote benefit of a third party.” Thompson, 614 P.2d at 737. ¶ 32. In Vermont, our most significant decision on the duty of mental health professionals to third parties is Peck, 146 Vt. 61, 499 A.2d 422, a duty to warn case.4 Like Tarasoff, Peck deals with the failure to warn an identified victim and expressed a broad general duty of the mental health professional or institution to third parties affected by the conduct of the patient. Unlike Tarasoff, the patient threatened the property, rather than the person, of the plaintiff. Id. at 64, 499 A.2d at 424. In Peck, the plaintiffs sued a mental health agency for damages to their property after their son set fire to their barn. Id. At the time of the incident, the son was an outpatient of Counseling Service of Addison County and was living at home with his parents. Id. at 63, 499 A.2d at 424. After a fight with his father, the son left home and went to the Counseling Service to 4 Peck is a 3 to 2 decision with no majority opinion. Justice Underwood concurred in the result but did not join the opinion of Justice Hill, which explained the rationale for reaching that result. Justice Underwood did not author a concurring opinion explaining why he disagreed with the rationale of Justice Hill’s opinion. The dissent authored by Chief Justice Billings, and joined by Justice Peck, argued that the mental health professional had no duty to third parties and the recognition of any such duty should be undertaken by the Legislature and not by this Court. The plurality opinion of Justice Hill has been cited and quoted in part in later opinions of this Court without an explanation that it is not a majority opinion. See, e.g., Lenoci v. Leonard, 2011 VT 47, ¶ 15, 189 Vt. 641, 27 A.3d 694 (mem.); Smith v. Day, 148 Vt. 595, 597, 598, 538 A.2d 157, 158, 159 (1999). We have similarly done so here. To the extent that is necessary for the opinion reached herein, we adopt the opinion of Justice Hill. 16 speak with his therapist. Id. He told his therapist about the fight and that “he didn’t think his father cared about him or respected him.” Id. At a following session, the son stated that he was still angry with his father, and told his therapist that he “wanted to get back at his father” by “burn[ing] down his barn.” Id. at 64, 499 A.2d at 424. After discussing the consequences of the act, the son promised his therapist that he would not burn down the barn. The therapist did not disclose these threats to the parents or any other staff members of Counseling Service. Several days later, the son set fire to his parents’ barn, which was completely destroyed. Id. at 63, 499 A.2d at 424. The parents claimed that the therapist had a duty to protect them from their son’s violent behavior, that the therapist knew or should have known that their son presented an unreasonable risk of harm to them, and that the therapist breached that duty by failing “to take steps that were reasonably necessary to protect” them. Id. at 64. ¶ 33. The Peck Court began its analysis with the Restatement (Second) of Torts § 315, which provides that a duty arises if: “(a) a special relation exists between the actor and the third person which imposes a duty upon the actor to control the third person’s conduct, or (b) a special relation exists between the actor and the other which gives to the other a right to protection.” The Court concluded that “the relationship between a clinical therapist and his or her patient ‘is sufficient to create a duty to exercise reasonable care to protect a potential victim of another’s conduct,’ ” id. at 65, 499 A.2d at 425 (quoting Tarasoff, 551 P.2d at 343), even though the level of control over an outpatient may be less than that exercised over institutionalized patients. Id. The Court noted that “Vermont already recognizes the existence of a special relationship between a physician and a patient that imposes legal duties on the physician for the benefit of third persons,” citing statutes requiring doctors to warn others of contagious diseases to protect the public health. Id. For example, 18 V.S.A. § 1004, which has not been amended since the time of the Peck decision, provides that: “A physician who knows or suspects that a person whom he or she has been called to attend is sick or has died of a communicable disease dangerous to the public health shall immediately quarantine and report to the health officer the place where such case exists.” 17 Accordingly, the Court saw no reason why the same duty should not exist in a mental health setting. Id. ¶ 34. In imposing a duty on the therapist, the Court rejected the defendant’s arguments that a mental health professional cannot predict future violent behavior and that physician-patient privilege protects against disclosure of confidential information. Id. at 66, 499 A.2d at 425; see also 12 V.S.A. § 1612(a). After quoting at length from Tarasoff, the Court noted that the trial court found sufficient facts to demonstrate that the therapist knew or should have known the defendant posed a threat to his parents and that the failure of the therapist to reveal that threat “was inconsistent with the standards of the mental health profession.” Id. at 66, 499 A.2d at 425-26. Ultimately, we held that “a mental health professional who knows or, based upon the standards of the mental health profession, should know that his or her patient poses a serious risk of danger to an identifiable victim has a duty to exercise reasonable care to protect him or her from that danger.” Id. at 68, 499 A.2d at 427. II. The Duty to Warn ¶ 35. Having set out the nature of duties for tort actions and the important sources of law for defining the duties of mental health professionals to third parties injured by their patients, we look at the specific duties alleged in plaintiffs’ complaint in this case. As we stated above, the positions of the parties begin to differ when we look at the specific duties alleged. The decisions from around the country reflect these differences. Although the central holding of Tarasoff has been widely accepted around the country, the same is not true for extensions of the duty beyond providing warnings. Further, courts in other jurisdictions are divided on how far to extend the Tarasoff duty to warn, and the subsequent limitation on that duty expressed in Thompson. ¶ 36. We first consider plaintiffs’ allegations that defendant, Brattleboro Retreat, breached its duties to warn E.R.’s parents of the risk of his dangerous behavior and to train them in how to handle him. In examining the duty of defendant, we put these claims together under the general description of duty to warn and consider later whether separate duties are involved. Courts 18 differ when evaluating a claim of a duty to warn someone other than an identified victim. As discussed previously, several courts have limited the duty to identifiable victims, or a class of individuals whose injury is foreseeable because of their relationship or proximity to a specifically identifiable victim. See, e.g., Dawe v. Dr. Reuven Bar-Levav & Assocs., P.C., 780 N.W.2d 272, 278 (Mich. 2010) (establishing duty to warn for mental health professionals when patient makes threat of violence against “reasonably identifiable third person” and has apparent intent and ability to carry out threat); Emerich v. Philadelphia Ctr. for Human Dev., Inc., 720 A.2d 1032, 1040-41 (Pa. 1998) (stating that psychotherapist has duty to warn only when specific and immediate threat of serious bodily injury has been made against “specifically identified or readily identifiable victim”). The reasoning is much the same in these decisions, as they reflect the policies set forth by the California Supreme Court in Thompson. See, e.g., Fraser v. United States, 674 A.2d 811, 816 (Conn. 1996) (stating that “the interests of the mental health profession in honoring the confidentiality of the patient-therapist relationship and in respecting the humanitarian and due process concerns that limit the involuntary hospitalization of the mentally ill” counsel against imposing “liability for harm to unidentifiable victims or unidentifiable classes of victims” (citations omitted)). Many of these courts also rely on their existing precedent in the area of negligence, citing the limitations on third-party liability already recognized in their common law. Id. at 815-16 (observing that scope of liability in negligence to injured third parties has not been enlarged by changes in tort law). ¶ 37. However, several other courts have held that a duty to warn is owed not only to specifically identified or identifiable victims, but to foreseeable victims or to those whose membership in a particular class—for example, those living with the patient—places them within a zone of danger. See, e.g., Lipari v. Sears, Roebuck & Co., 497 F. Supp. 185, 194-95 (D. Neb. 1980) (applying Nebraska law) (holding that if psychiatrist can reasonably foresee risk of harm to plaintiffs or “class of persons” of which plaintiffs were members, he or she has duty to warn, even if victims are not specifically identified); Naidu v. Laird, 539 A.2d 1064, 1073 (Del. 1988) (stating 19 psychiatrist has duty to warn “potential victims or a class of potential victims” when “in accordance with the standards of the profession,” psychiatrist knows or should know that patient’s “dangerous propensities present an unreasonable risk of harm to others”); Schuster v. Altenberg, 424 N.W.2d 159, 165 (Wis. 1988) (noting that psychotherapist’s duty to warn “is not limited by requirement that threats made be directed to an identifiable target” as it must simply be foreseeable that omission “may cause harm to someone”). ¶ 38. Plaintiffs ask that we construe Peck broadly to find that E.R.’s parents should have been warned of his propensities in order to protect third parties. Defendants, on the other hand, focus on the language in our holding that specifies an “identifiable victim,” a factor absent here. They argue that Peck is specifically limited to the circumstance where there is an identifiable victim and should be interpreted to hold that there is no duty to warn in the absence of such a victim. We note that none of our more recent cases have expanded the duty articulated in Peck to unforeseeable victims. Nevertheless, we agree with plaintiffs that the specific liability holding of Peck is based on the facts and circumstances that were before the Court. Thus, while Peck finds a duty to warn an identifiable victim, it does not hold that liability is limited to those circumstances and in fact draws on public health cases where there is no identified victim.5 In saying this, we 5 Peck relied in part on the decision of a New Jersey court in McIntosh v. Milano, 403 A.2d 500 (N.J. Super. Ct. Law Div. 1979). That decision drew heavily on the duty a physician has to the public when encountering a case of a communicable disease to explain the duty of a mental health professional with a dangerous patient. The court reasoned: To summarize, this court holds that a psychiatrist or therapist may have a duty to take whatever steps are reasonably necessary to protect an intended or potential victim of his patient when he determines, or should determine, in the appropriate factual setting and in accordance with the standards of his profession established at trial, that the patient is or may present a probability of danger to that person. The relationship giving rise to that duty may be found either in that existing between the therapist and the patient, as was alluded to in Tarasoff II or in the more broadly based obligation a practitioner may have to protect the welfare of the community, which is analogous to the obligation a physician has to warn third persons of infectious or contagious disease. 20 are also cognizant of the fact that Peck was decided thirty years ago, before modern trends in this area, such as the Restatement (Third) of Torts § 41. ¶ 39. The dissent cites a number of cases that it argues show that the majority rule is that there is no duty to warn anyone other than an identified victim. Post, ¶¶ 87-90. In fact, most of these cases, including Tarasoff, do not contain such a limitation. As we set out above, Tarasoff contains this explanation of the duty: “Thus it may call for him to warn the intended victims or others likely to apprise the victim of the danger, to notify the police, or to take whatever other steps are reasonably necessary under the circumstances.” Tarasoff, 551 P.2d at 342. ¶ 40. Other cases, including Fraser, 674 A.2d at 817—a duty to treat and not a duty to warn case—acknowledge that the duty can extend to persons in the zone of danger, one of the bases for this decision. The court in Estates of Morgan v. Fairfield Family Counseling Center, 1997-Ohio-194, 673 N.E.2d 1311, 1328, explicitly reserves the issue: “We need not determine at this time whether and to what extent the readily identifiable victim rule should attach in a failure- to-warn case. The case sub judice does not involve any allegation that [the defendants were] negligent in failing to warn [the plaintiff’s] family.” In Emerich, 720 A.2d at 1040 n.8, the court stated: “We are not required to address the related issue of whether this duty to warn may be discharged by notifying relatives of the victim, other individuals close to the victim, or the police.” In fact, the only case cited by the dissent that recognizes the Tarasoff duty but limits the required warning to an identified victim is Eckhardt v. Kirts, 534 N.E.2d 1339 (Ill. App. Ct. 1989), a twenty- seven year old intermediate appellate court decision. The dissent asserts here that a holding that Id. at 511-12 (footnote omitted). The communicable disease cases continue to be strong indicators of an extended duty. For example, in C.W. v. Cooper Health System, 906 A.2d 440, 450 (N.J. Super. Ct. App. Div. 2006), the court that decided McIntosh held that a physician owed a duty to a patient and to others, specifically the patient’s partner and child, to disclose the patient’s HIV-positive status. 21 the duty to warn extends beyond the identified victim represents an unacknowledged minority position. We reject that assertion because it is not true. ¶ 41. We agree that the Peck holding does not apply to a duty to warn the general public. The complaint here expresses a much narrower duty: to warn E.R.’s caretakers, here, his parents. It alleges that the warnings would have informed them such that they could have properly supervised E.R. Any warning to E.R.’s parents would not have been predicated on their membership in the public at large, however, and would have been predicated on their assumption of custody and caretaking responsibilities of E.R., even though an adult, from the Retreat. For two reasons, which circumscribe the scope of the duty we now recognize, we conclude that the Retreat had a duty to give such warnings. ¶ 42. The first reason involves the unique circumstances of this case. The complaint alleges that the parents had assumed the role of E.R.’s caretakers even though he was an adult. The extended record shows that the parents were directly involved in E.R.’s care and treatment from the first time that he showed symptoms of mental illness and were involved in controlling his conduct. This meant that they had assumed responsibilities, the discharge of which could be affected by the information they received. For example, the limited facts indicate that in a discharge conference, Retreat staff told E.R.’s mother that she should give E.R. his medication, but also indicate that E.R. stopped taking medication on his own after discharge. A complete warning of the effect of E.R. discontinuing the medication may have affected the parents’ degree of involvement in ensuring E.R. took his medication. ¶ 43. Because the parents were monitoring E.R.’s needs and treatment, and were involved in his discharge, they were available to receive information on his continuing need for treatment and the actions that should have been taken based on his behavior. In fact, the complaint alleges that the Retreat’s mental health professional, who was aware of the risk that E.R. would suffer decompensation and stop his medications if discharged, had “discussed discharge with E.R.’s mother” before determining such a course was possible. Moreover, before the discharge, 22 the Retreat made an aftercare treatment plan “with E.R. and his parents.” The complaint thus supports an inference that if E.R. had not had parents into whose care he could be released, parents who could monitor his symptoms and medication intake, Brattleboro Retreat would not have authorized his release. ¶ 44. Again, we emphasize that we are dealing with a case that was dismissed on the pleadings with no factual development.6 We conclude that by transferring custody of a patient with a psychotic disorder to caretakers whom they knew lacked psychiatric training and experience, the Retreat owed a duty of care to provide reasonable information to the parents to enable them to recognize the dangers and fulfill the responsibilities envisioned for them in the treatment plan. In adopting this duty definition, we are relying upon Peck, as well as precedents from other jurisdictions and the Restatement (Second) of Torts §§ 315 and 319. Although we have discussed it above for background, we have not adopted and relied upon § 41(b)(4) of the Restatement (Third) of Torts. We recognize that there are contrary decisions from some of our sister states, but generally we find them distinguishable. For example, in In re Votteler’s Estate, 327 N.W.2d 759, 760 (Iowa 1982), the plaintiff was injured when a patient suffering from a serious mental illness ran over her with a car. The plaintiff alleged that the patient’s psychiatrist was negligent in failing to warn the patient’s husband, a friend of the plaintiff, of the danger the patient presented to the public “so he could have protected [the] plaintiff.” Id. In its ruling, the Iowa Supreme Court held that the Tarasoff rule could not be “stretched” to support finding a cause of action against a psychiatrist in these circumstances, as such a theory would “attenuate[] the Tarasoff rule beyond the breaking point.” Id. at 761. However, the decision was based on the 6 The dissent goes through some of the known facts apparently to assert that the Retreat took many steps to inform the parents of the risk and how to deal with it, but those steps were not successful in controlling the risk of E.R.’s violent actions, and demanding any more involves the imposition of unreasonable policy judgments. Post, ¶¶ 102-105. At this point, the dissent’s concerns are premature and speculative because no facts are established for purposes of the motion to dismiss. It may be that the facts will show that the Retreat completely explained the risks and how parents should respond to them. It may be otherwise as plaintiffs allege. Neither assessment is possible on the very limited record before us. 23 particular facts of the case. Unlike in Tarasoff, the record “lack[ed] any basis for finding the therapist knew of the danger” the patient presented, id. at 762, but instead, contained overwhelming evidence to suggest the plaintiff was herself well aware of the patient’s violent propensities; indeed, the patient had told the plaintiff on multiple occasions that “she would kill her.” Id. at 761. ¶ 45. By contrast, the complaint here is replete with allegations that staff members at Retreat were well aware of E.R.’s capacity for violence. Upon his admission at the Retreat, E.R.’s records from the Vermont State Hospital were reviewed, including the findings by his intake physician that E.R. was “clearly a danger to others” and would be a “danger to his own family” if released. He verbalized “homicidal ideation” toward staff only nine days after his admission to the Retreat, and throughout his stay, continued to have auditory hallucinations which commanded him to kill himself or others. E.R.’s behavior was so aggressive that his psychiatrist adopted an Alternative Low Stimulation Area (ALSA) treatment plan, which involves “placing patients who are verbalizing or demonstrating they are unsafe in a special area” that is staff-intensive and free from any objects that can be used to harm the self or others. Indeed, it appears from the complaint that E.R. was kept in ALSA for all but the first nine days of his stay at the Retreat. ¶ 46. Because the case never went beyond the complaint stage, there is no allegation that the parents were aware of E.R.’s risk of danger such that they could be charged with “knowledge of the danger as a matter of law” sufficient to nullify any duty to warn. Id. at 762. The expanded record shows that the state of the parents’ knowledge is strongly disputed. ¶ 47. A second reason for finding a duty to warn in this case is that E.R.’s parents fell within the “zone of danger” from E.R.’s conduct. While there is no allegation that E.R. ever threatened his parents, plaintiffs’ complaint alleged that by failing to warn the parents, the “Brattleboro Retreat needlessly endangered the safety of third parties, including, not limited to the Plaintiffs.” Moreover, it is alleged that E.R. specifically threatened his caretakers, and the parents were to become his caretakers after his discharge from the Retreat. 24 ¶ 48. The duty to warn those in the zone of danger was addressed by the Arizona Supreme Court in a case very similar to this one. See Hamman v. Cty. of Maricopa, 775 P.2d 1122, 1123 (Ariz. 1989). In Hamman, the patient was brought to an emergency psychiatric center because of violent and other “abnormal behavior.” His parents expressed fear that he “would either be killed or kill somebody” and reported that they maintained constant supervision over him. Id. After speaking with a doctor, the doctor refused to admit the patient to the hospital, but prescribed medication and advised his mother to take him to follow-up care at a medical center. Id. at 1124. One morning, the patient refused to take his medicine. Later that day, he attacked his father with an electric drill. ¶ 49. The parents filed a claim against the hospital for negligence, claiming that the doctor owed them a duty to reasonably diagnose and treat their son’s condition and that they reasonably relied upon the doctor’s advice that their son was harmless. In assessing the scope of the duty, the court rejected the narrow approach of requiring an identifiable victim but also cautioned against adopting a rule that is “too inclusive, subjecting psychiatrists to an unreasonably wide range of potential liability.” Id. at 1127. The court concluded: If indeed [the doctor] negligently diagnosed [the patient] as harmless, the most likely affected victims would be [his parents]. Their constant physical proximity to [the patient] placed them in an obvious zone of danger. [His parents] were readily identifiable persons who might suffer harm if the psychiatrist was negligent in the diagnosis or treatment of the patient. The fact that [the patient] never verbalized any specific threats against [his parents] does not change the circumstances that, even without such threats, the most likely victims of the patient’s violent reaction would be [his parents]. Id. at 1128 (emphasis added); see also Div. of Corr. v. Neakok, 721 P.2d 1121 (Ala. 1986), overruled on other grounds by Dep’t of Corr. v. Cowles, 151 P.3d 353 (Ala. 2006) (finding that state agencies had duty to warn residents of small community of parolee’s dangerous propensities, particularly victims, as one was foreseeable and others were in zone of danger). We find Hamman persuasive and follow its reasoning. 25 ¶ 50. In recognizing a duty to warn, we distinguish this case from Thompson, where the mother of the juvenile offender was not foreseeably endangered, as the offender’s threats were to children. By contrast, E.R.’s parents were in the zone of danger, as E.R.’s dangerous propensities were not targeted towards any one class of individuals. If E.R. had harmed his parents, we may have easily concluded that the Retreat owed them a duty to warn of his violent tendencies; if he directed violence towards a member of the general public, the question becomes harder. If defendant owed a duty to the parents and breached that duty, resulting in harm to an unidentifiable third party, is defendant liable? ¶ 51. To answer this question, we look to cases involving a physician’s duty to warn a patient, the breach of which results in injury to a third party. Most courts have recognized that physicians owe a duty to their patients to warn them about the hazards of driving on certain medications and that, when the physician breaches that duty, causing harm to a third party, he or she is liable for that failure to warn. See, e.g., Taylor v. Smith, 892 So. 2d 887, 893-94, 896 (Ala. 2004) (holding that duty of care owed by physician to his patient “extends to third-party motorists who are injured in a foreseeable automobile accident with the patient that results from the [physician’s] administration of methadone” and citing cases from Maine, Michigan, New Mexico, Oregon, Texas, and Wisconsin that have imposed similar duty to warn); see also Restatement (Third) of Torts § 41 cmt. h. But see Jarmie v. Troncale, 50 A.3d 802, 810 (Conn. 2012) (holding that physicians owe no duty to warn patients not to drive for benefit of third parties because “Connecticut precedent does not support it, the plaintiff was an unidentifiable victim, public policy considerations counsel against it, and there is no consensus among courts in other jurisdictions, which have considered the issue only rarely”). We conclude, based on existing precedent and modern trends in negligence law, that the Retreat had a duty to warn E.R.’s parents as individuals in the “zone of danger” of E.R.’s dangerous propensities.7 7 Again, we do not adopt Restatement (Third) of Torts § 41(b)(4) to support this holding. 26 ¶ 52. This duty on which we base this decision is a narrow one, and applies only when a caregiver is actively engaging with the patient’s provider in connection with the patient’s care or the patient’s treatment plan (or in this case discharge plan), the provider substantially relies on that caregiver’s ongoing participation, and the caregiver is himself or herself within the zone of danger of the patient’s violent propensities.8 It does not require health care providers to seek out a caretaker for the patient to whom they can impart this information; nor does it require physicians to make disclosures to family members or others who may live with the patient but are not engaged with the patient’s treatment and are not factored into the patient’s treatment plan. ¶ 53. As we noted above, plaintiffs’ complaint alleges two separate duties—a duty to warn and a duty to train. The complaint described the duty to warn as a duty to inform E.R.’s parents that “he posed a risk to the public including themselves.” It described the duty to train as the duty to instruct the parents “to supervise him, how to monitor and manage his medications intake, to effectively recognize when medications were being avoided and to effectively respond so that measures necessary and appropriate to protect potential victims could be implemented.” The duty to warn as we have described it above contemplates more than simply advising the parents that their son posed a risk; it may also entail a duty to provide reasonable information to enable the parents to fulfill the role envisioned for them in the treatment plan to help keep their son safe. The specific nature and content of that information is case-specific, and a question of fact. In that sense, the duty to “warn” may be better described as a duty to “inform” that incorporates some elements of what plaintiffs describe as a distinct duty to “train.” ¶ 54. However, we find the amorphous concept of a “duty to train” as a distinct cause of action unworkable, and note that such a duty, in contrast to the duty to warn as we have described 8 At the same time as we stress the narrowness of the duty we recognize to decide this case, we emphasize our recognition that neither Peck nor Tarasoff decided whether a duty would be present based on facts and claims not in those cases. It is the nature of development of the common law that we do not address whether a duty can arise in circumstances not before us. 27 it, lacks grounding in existing caselaw. For these reasons, we decline to recognize a distinct cause of action for failure to “train” E.R.’s parents. ¶ 55. We have initially analyzed the duty to inform with respect to the Retreat. Plaintiffs’ complaint alleges a similar duty to warn with respect to NKHS. Although the two entities had different responsibilities, we see no reason to differentiate between them in defining the duty that each owed. Thus, we hold that NKHS had the same duty to warn, recast above as including a duty to provide particular information, as the Retreat did. ¶ 56. As we discussed briefly above, defendants also allege that plaintiffs’ duty-to- inform counts should be dismissed because plaintiffs cannot show the element of causation. Duty is a legal question, and is therefore appropriate for our consideration on an appeal from a motion to dismiss. We cannot say the same about the element of causation. Until there is factual development on the extent to which defendants may have fallen short of their duty, if any, and were negligent in doing so, we cannot determine whether plaintiffs can meet their burden of showing that defendants’ negligence was a proximate cause of plaintiffs’ damages. We cannot dismiss the complaint based on the absence of causation. ¶ 57. Finally, as to the duty to warn or inform, we must address the confidentiality arguments raised in the briefs of defendant NKHS and amici curiae Vermont Council of Developmental and Mental Health Services, Inc., Disability Rights of Vermont, Inc., and the Vermont Association of Hospitals and Health Systems. Defendant NKHS and amici curiae argue that expansion of the standards under which psychotherapists must disclose protected health information without consent beyond those imposed in Peck violates state and federal law and contrary to policy goals of encouraging individuals to seek mental health treatment. In particular, defendant and amici curiae note that Vermont has codified the physician-patient privilege in 12 V.S.A. § 1612(a), which precludes the disclosure of confidential information absent patient permission or authorization from an express provision of law. Amici curiae argue that while Peck modified § 1612 to require disclosure when a mental patient has threatened “serious harm to an 28 identified victim,” 146 Vt. at 67, 499 A.2d at 426, no express provision of Vermont or federal law permits disclosure under the broad terms of Restatement (Third) of Torts § 41(a)—also urged by plaintiffs—when a patient poses “risks” to the safety of the public at large. ¶ 58. Amici curiae also note that other Vermont statutes, particularly 18 V.S.A. § 1852(a)(7) and § 7103, protect from disclosure clinical information identifying current or former hospital patients. See id. § 7103(a) (“All certificates, applications, records, and reports . . . directly or indirectly identifying . . . an individual whose hospitalization or care has been sought or provided under this part, together with clinical information relating to such persons shall be kept confidential and shall not be disclosed by any person”); id. § 1852(a)(7) (“The patient has the right to expect that all communications and records pertaining to his or her care shall be treated as confidential. Only medical personnel, or individuals under the supervision of medical personnel, directly treating the patient, or those persons monitoring the quality of that treatment . . . shall have access to the patient’s medical records.”). Finally, amici curiae suggest that an expansion of the duty to warn would violate the confidentiality provisions established in the Privacy Rule adopted pursuant to the Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. § 1320d et seq., which applies to the information acquired by community mental health agencies across the United States and which is exempt from any public policy exception created by this Court.9 ¶ 59. We recognize that although defendants and amici have accepted Peck’s disclosure requirements as a baseline beyond which we cannot go, that decision gave very limited consideration to binding confidentiality requirements. The Peck Court noted that the Legislature 9 In its brief to this Court, amicus curiae The Vermont Association of Hospitals and Health Systems also notes that under section five of the American Medical Association’s (AMA) Code of Medical Ethics, disclosure of confidential information is permitted only when a patient “threatens to inflict serious physical harm to another person or to him or herself and there is a reasonable probability that the patient may carry out the threat.” Code of Ethics of the American Medical Association, Opinion 5.05 (2014-2015), https://perma.cc/5QPE-HYU3. We are mindful however, of the fact that ethical standards, whether promulgated by the AMA, the Vermont Medical Society, or Vermont Psychiatric Association, are “aspirational in nature and not enforceable by law.” Bryson v. Tillinghast, 749 P.2d 110, 114 (Okla. 1988); accord Caldwell v. Chauvin, 464 S.W.3d 139, 156 (Ky. 2015). 29 had created certain exceptions to the statutory patient’s privilege and that an exception similar to that sought for mental health professionals to warn identified potential victims existed for lawyers and, consequently, created by judicial decision an exemption for mental health professionals. 146 Vt. at 67-68, 499 A.2d at 426. To ensure that the disclosure requirements we have adopted fully comply with confidentiality requirements, we are reexamining the issue here rather than relying upon Peck. ¶ 60. Our conclusion is that the aforementioned statutes and regulations do not bar plaintiffs’ failure-to-inform cause of action in this case for three reasons. First, while it is true that 12 V.S.A. § 1612 and the more comprehensive Vermont Rule of Evidence 503 prevent physicians from disclosing health information or history, the statute codifies an evidentiary privilege, thus limiting its application to judicial proceedings. See Steinburg v. Jensen, 534 N.W.2d 361, 370 (Wis. 1995) (“The physician-patient privilege is a testimonial rule of evidence, not a substantive rule of law regulating the conduct of physicians.”). As such, the privilege does not preclude the Retreat from warning E.R.’s parents of E.R.’s likelihood of violent actions.10 See 1 McCormick on Evid. § 72.1 (7th ed.) (“[T]rue rules of privilege operate generally to prevent revelation of confidential matter within the context of a judicial proceeding . . . . [They] do not speak directly to the question of unauthorized revelations of confidential matter outside the judicial setting, and redress . . . must be sought in the law of tort or professional responsibility.” (footnotes omitted)).11 10 Peck accepted, without analysis, that 12 V.S.A. § 1612(a) prohibited disclosure outside of judicial proceedings and held that the privilege could be waived “under appropriate circumstances” by judicial decision. Peck, 146 Vt. at 67, 499 A.2d at 426. As the text states, the statute does not prevent a mental health professional from disclosing patient information as part of a warning to the patient’s family because this is not an in-court disclosure. We do not consider whether a waiver of the privilege, if it applied, is possible and appropriate. 11 The defendants, and amicus curiae who support their position, have raised in their re- argument motions potential sources of restrictions on disclosure not identified in the presentations to the trial court or to this Court in the briefs. We have considered them in the interest of fully reflecting the effect of disclosure restrictions on the duty in this case. We do not consider whether a duty of confidentiality between a patient and mental-health professional arises from any other source. See, e.g., Schuster, 424 N.W.2d at 171 (noting that exception to psychotherapist-patient privilege is limited to evidentiary setting and exploring physicians’ broader ethical duty of 30 ¶ 61. Second, the confidentiality statutes cited by amici curiae are not inconsistent with the disclosures required by the duty described here. One statute sets forth a “bill of rights” for patients who are admitted to a hospital on an inpatient basis. Among other things, it states that “[t]he patient has the right to expect that all communications and records pertaining to his or her care shall be treated as confidential” except when authorization is provided. 18 V.S.A. § 1852(a)(7). Further, it recognizes a patient’s right to privacy and provides that case discussions are confidential and “[t]hose not directly involved in the patient’s care must have the permission of the patient to be present.” Id. § 1852(a)(6). The duty recognized in this decision—to provide certain information to a caregiver actively engaged in the patient’s care and treatment plan—is not at odds with these protections, which prevent disclosures to those not directly involved in the patient’s care without the patient’s permission. Likewise, the mental-health statute, 18 V.S.A. § 7103(b), explicitly states that “[n]othing in this section shall preclude disclosure . . . of information concerning medical condition” to certain individuals including the person’s family, clergy, health care agent, or “an interested party.” Again, if the duty applies, it will be to provide information to an interested individual whose ongoing participation in the patient’s care is part and parcel of the patient’s treatment plan. ¶ 62. Finally, the federal regulations governing HIPAA’s Privacy Rule, relied upon by amici, also carve out two exceptions relevant to the disclosure obligation imposed in this decision. The first is a dangerous patient exception to the confidentiality requirement intended to “avert a serious threat to health or safety”: (1) Permitted disclosures. A covered entity may, consistent with applicable law and standards of ethical conduct, use or disclose protected health information, if the covered entity, in good faith, believes the use or disclosure: confidentiality”); Sorensen v. Barbuto, 2008 UT 8, ¶ 17, 177 P.3d 614 (distinguishing physician’s duty of confidentiality from physician-patient testimonial privilege and recognizing a “healthcare fiduciary duty of confidentiality”). 31 (i)(A) is necessary to prevent or lessen a serious and imminent threat to the health or safety of a person or the public; and (B) is to a person or persons reasonably able to prevent or lessen the threat. 45 C.F.R. § 164.512(j) (emphasis added). In this case, the disclosure requirement is imposed to avert a serious threat to health or safety and under circumstances that meet the specific language of (i)(A) and (B). The second exception is for emergency circumstances, allowing limited use and disclosures: If the individual is not present, or the opportunity to agree or object to the use or disclosure cannot practicably be provided because of the individual’s incapacity or an emergency circumstance, the covered entity may, in the exercise of professional judgment determine whether the disclosure is in the best interests of the individual and, if so, disclose only the protected health information that is directly relevant to the [family member, other relative, or close personal friend’s] involvement with the individual’s care or payment related to the individual’s health care. Id. § 164.510(b)(3); see also Office for Civil Rights, A Health Care Provider’s Guide to the HIPAA Privacy Rule: Communicating with a Patient’s Family, Friends, or Others Involved in the Patient’s Care 2, https://perma.cc/9596-MXWK. ¶ 63. As discussed above, plaintiffs’ complaint alleges sufficient facts to indicate that the Retreat was well aware of E.R.’s propensity for violence, particularly when off his medication, and that E.R.’s parents likely underestimated the degree of danger E.R. posed to his caretakers and to the public. Similarly, it is evident from the facts that E.R. was sufficiently incapacitated such that disclosure could not be practicably authorized and that information about his condition and violent behavior would have been “directly relevant” to the care his parents provided him. We recognize that both of these subsections permit, rather than mandate, unauthorized disclosure in the aforementioned instances, as well as that both predicate the admissions in the medical entity’s good faith belief and professional judgment that disclosure was necessary. In essence, by this decision, we are imposing the mandate as a matter of tort law in circumstances where the mental health professionals and institution are authorized, but not obligated, to disclose under HIPAA. 32 ¶ 64. In reaching our decision, we recognize the “interest in safeguarding the confidential character of psychotherapeutic communications” as argued by the dissent. Post, ¶ 90. We are bound by the direction of Peck: “In the same manner that due care must be exercised in the therapist’s determination of what steps may be necessary to protect the potential victim of a patient’s threat of harm, so too must due care be exercised in order to ensure that only that information which is necessary to protect the potential victim is revealed.” 146 Vt. at 68, 499 A.2d at 426-27. Based on the above analysis, we hold that both the Retreat and NKHS had a duty to provide information to E.R.’s parents, both to warn them of E.R.’s risk of violence to themselves and others and to provide them reasonable information to enable them to fulfill their role in keeping him safe. We stress that we are only defining the duty owed by the mental health services providers, and allowing this action to proceed to determine whether defendants breached their duties, and if so, were negligent in doing so. We reverse the dismissal of Counts II, III and V of plaintiffs’ complaint and remand for those counts to proceed. III. Duty to Protect ¶ 65. We next consider plaintiffs’ other counts, starting with those against the Retreat. The complaint contains two additional counts with respect to this defendant: (1) that defendant negligently discharged E.R. and this discharge was the proximate cause of plaintiffs’ damages; and (2) defendant undertook to render a service to E.R. necessary to protect third parties, failed to exercise due care in the performance of its undertaking, and its negligence was a proximate cause of the damages to plaintiffs. Plaintiffs allege these counts relying upon the general duty expressed in Tarasoff and Peck and the duty described in § 41(b)(4) of the Restatement (Third) of Torts. With respect to the second of these duties—that is, to exercise due care in the performance of an undertaking—plaintiffs also rely on § 324A of the Restatement (Second) of Torts.12 12 This duty is also contained in the Restatement (Third) of Torts: Liability for Physical and Emotional Harm § 43(a). 33 ¶ 66. Relying principally on our decision in Sorge, the Retreat argues that these duties do not exist or do not apply here. We begin with the sources of law as argued by the parties. ¶ 67. We look first at Sorge, the most relevant of our precedents. In Sorge, one of the plaintiffs was injured after being assaulted by a juvenile offender who was in the custody of the Vermont Department of Social and Rehabilitation Services (SRS). The victim and his wife filed suit against the State, alleging that SRS was negligent in failing to adequately supervise and control the juvenile and that, as a result of the negligence, the victim sustained injuries. The plaintiffs claimed that SRS was aware of the juvenile’s “history of violent, assaultive and delinquent behavior,” but that SRS nonetheless placed him in the temporary custody of his mother for the weekend and she “was either unlikely or incapable of adequately supervising him.” Sorge, 171 Vt. at 173, 762 A.2d at 818. ¶ 68. We began by summarizing the factors to be considered in determining whether a governmental body has a duty of care to a specific person, beyond its duty to the public at large: (1) whether an ordinance or statute sets forth mandatory acts clearly for the protection of a particular class of persons, rather than the public as a whole; (2) whether the government has actual knowledge of a condition dangerous to those persons; (3) whether there has been reliance by those persons on the government’s representations and conduct; and (4) whether failure by the government to use due care would increase the risk of harm beyond its present potential. Id. at 174, 762 A.2d at 819. The plaintiffs conceded that there was no specific statutory provision mandating protection for the victim or any other particular class of persons, arguing instead that because SRS’s failure to control the juvenile resulted in harm, liability should be imposed on the State. The plaintiffs further contended that § 319 of the Restatement (Second) of Torts creates an exception for “persons having dangerous propensities” that extends beyond the duty to warn and imposes an obligation to control an offender for the protection of the public. This section provides: “One who takes charge of a third person whom he knows or should know to be likely to cause bodily harm to others if not controlled is under a duty to exercise reasonable care to control the third person to prevent him from doing such harm.” Restatement (Second) of Torts § 319. Thus, 34 the section creates an exception for cases where a “special relationship” exists between the State and the juvenile. ¶ 69. We rejected both arguments. We found the first theory at odds with the principle espoused in both Peck and Restatement (Second) of Torts § 315 that “[g]enerally, there is no duty to control the conduct of another in order to protect a third person from harm.” Sorge, 171 Vt. at 176, 762 A.2d at 819. We also found the “special relationship” theory to be inconsistent with the goals of rehabilitation and reunification underlying both juvenile and adult detention programs. Id. at 177-78, 762 A.2d at 820-21; see also Rivers v. State, 133 Vt. 11, 14, 328 A.2d 398, 400 (1974) (emphasizing rehabilitative goals of release of inmates on probation or parole, and stating that liability premised on duty of State to third parties harmed during inmate’s release on weekend pass “runs dangerously parallel to the arguments for preventative detention that represent an overriding of constitutional limitations”); Finnegan v. State, 138 Vt. 603, 606, 420 A.2d 104, 105 (1980) (holding that escaped prisoner’s negligence cannot be transferred to State). We further observed that the § 319 exception had been rejected by a number of other states “that have recognized that most juvenile and adult programs dealing with persons committed to the custody of the State are intended to rehabilitate conduct rather than control it.” Sorge, 171 Vt. at 177-78, 762 A.2d at 820-21. ¶ 70. Importantly, we stated that for § 319 to apply, the State’s purpose in assuming custody of an individual “must explicitly be to control that person” and that “attempts to exercise that control must be consistent with the specific objective of insulating a person having dangerous propensities from uncontrolled contact with others whom the State knows or has reason to know are likely to be harmed by the person the State intends to isolate.” Id. at 180, 762 A.2d at 822-23. This is true for both public entities, like those at issue in Peck and Sorge, as well as private institutions, like defendants here. See id. at 178, 762 A.2d at 821. ¶ 71. Returning to plaintiffs’ theory of duty and liability in this case, we can find no jurisdiction that has adopted Restatement (Third) of Torts § 41(b)(4). The Reporter’s Notes to 35 § 41(b)(4) cite cases from seven jurisdictions that have adopted a duty commensurate with that in § 41(b)(4) and broad enough to support the counts included in plaintiffs’ complaint here. As defendant points out, many of these decisions have been superseded by statutes that narrow the duty.13 Two cases in particular are helpful to understanding arguments for a broad expression of duty. ¶ 72. The first is Perreira v. State, 768 P.2d 1198 (Colo. 1989), a 4-3 decision from the Colorado Supreme Court. In that case, a police officer was shot and killed by a former mental patient who had been recently released from involuntary commitment to a mental institution. The officer’s spouse brought a wrongful death action against the state, the psychiatric hospital, and the treating psychiatrist, alleging that the psychiatrist was negligent in releasing the patient. The court held that: [W]hen, as here, a staff psychiatrist of a state mental health facility is considering whether to release an involuntarily committed mental patient, the psychiatrist has a legal duty to exercise due care, consistent with the knowledge and skill ordinarily possessed by psychiatric practitioners under similar circumstances, to determine whether the patient has a propensity for violence and would thereby present an unreasonable risk of serious bodily harm to others if released from the involuntary commitment, and, further, that in discharging this legal duty the psychiatrist may be required to take reasonable precautions to protect the public from the danger created by the release of the involuntarily committed patient, including the giving of due consideration to extending the term of the patient’s commitment or to placing appropriate conditions and restrictions on the patient’s release. Id. at 1200. The court reached that result primarily by relying upon §§ 315 and 319 of the Restatement (Second) of Torts. Id. at 1208-09, 1211. The court also concluded that given the psychiatrist’s knowledge of the patient’s condition and conduct, predictions of future dangerousness were within the professional’s expertise to a reasonable standard of accuracy. Id. at 1216-17. The court recognized the patient’s loss of liberty from commitment but did not 13 The presence of superseding statutes in many jurisdictions has made many judicial decisions irrelevant to the current law such that the subject is now controlled primarily by legislation. 36 conclude that the liberty loss should be elevated above the safety of others. Id. at 1217-18. It found the duty of care to third parties consistent with that otherwise imposed on a mental health professional. Id. at 1218-19. Finally, it rejected the claim that the duty is inconsistent with the requirement that institutionalization be used only when all lesser-restrictive alternatives are inadequate, as well as the argument that it would lead to over-commitment by mental health professionals to avoid tort liability. Id. at 1219-20. ¶ 73. In Estates of Morgan, the Ohio Supreme Court, also by a 4-3 decision, reached the same result in the context of a voluntary outpatient who had received therapy and medication from a community mental health center and thereafter shot and killed his parents and injured his sister. The plaintiffs alleged the mental health professionals were negligent in the treatment they provided. The court relied upon Restatement (Second) of Torts §§ 315 and 319 and Tasaroff in finding a broad duty. 673 N.E.2d at 1319-22. The court found that the defendants had sufficient control over the patient’s behavior in the outpatient setting—or could acquire that control—to support a broad duty of care. Id. at 1323-25. It found that although mental health professionals encounter difficulty in predicting dangerousness, the standard of care is based on their ability to do so with limitations. Id. at 1325. It also found, as the court did in Perreira, that the duty of care would not lead to excessive institutionalization of patients. Id. ¶ 74. The decisions contrary to Perreira and Morgan tend to rely upon the possible adverse consequences of recognizing a duty. The opposing arguments are captured in a quote from Sherrill v. Wilson, 653 S.W.2d 661, 664 (Mo. 1983), a case in which a patient was given a two- day pass from a mental institution, during which he shot another person: The treating physicians, in their evaluation of the case, well might believe that [the patient] could be allowed to leave the institution for a prescribed period and that his release on pass might contribute to his treatment and recovery. We do not believe that they should have to function under the threat of civil liability to members of the general public when making decisions about passes and releases. The plaintiff could undoubtedly find qualified psychiatrists who would testify that the treating physicians exercised negligent judgment, especially when they are fortified by hindsight. The 37 effect would be fairly predictable. The treating physicians would indulge every presumption in favor of further restraint, out of fear of being sued. Such a climate is not in the public interest. See also Restatement (Third) of Torts § 41 cmt. g (quoting Sherrill). We look to two decisions that specifically reject the holdings of Perreira and Morgan to explain this rationale. ¶ 75. In Leonard v. State, 491 N.W.2d 508 (Iowa 1992), which specifically rejected the holding of Perreira, the court applied § 319 of the Restatement (Second) of Torts, but held that it created a duty to protect only “reasonably foreseeable victims” and not members of the public generally. Id. at 511. The Iowa Supreme Court quoted Sherrill and indicated concern about the “limitless liability” created if the mental health professional’s duty extended to the public generally, concluding that the victim’s interest is outweighed by the harm to the public if “physicians were subject to civil liability for discharge decisions.” Id. at 512. The Iowa high court also concluded that liability for discharge of a patient would chill the physician’s decision-making and threaten the integrity of the civil commitment system. Id. ¶ 76. In Adams v. Board of Sedgwick County Commissioners, 214 P.3d 1173 (Kan. 2009), which reinforced an earlier decision of the Kansas Supreme Court, Boulanger v. Bol, 900 P.2d 823 (Kan. 1995), the court specifically rejected the Ohio Supreme Court’s holding in Morgan. In Boulanger, the Kansas high court had concluded that a mental health professional has no duty to third parties who are injured by an attack from a released voluntary patient, and no duty to initiate an involuntary commitment proceeding. Adams, 214 P.3d at 1184 (citing Boulanger, 900 P.2d at 823). The court in Adams reiterated this holding, particularly differing with the Morgan analysis that the duty to the patient and the duty to third parties are the same. Id. It also expressed concern as to whether the policy of holding patients in the least restrictive environment would be consistent with a broad liability rule. Id. ¶ 77. Here, the parties’ arguments, joined by amicus curiae representing the mental health provider community, mirror the arguments in the cases described above. The briefs provide us with cites to, and excerpts from, articles and studies that support or oppose the claim that mental 38 health provider liability of the type sought here will cause an increase in unjustified commitments and abandonment of treatment-in-the-least-restrictive-environment requirement, as well as the claim that mental health professionals cannot predict dangerousness with sufficient accuracy to act on their prediction. While these studies inform our decision, we do not find sufficient consensus to act primarily on them. They do suggest, however, that whatever decision we reach in this case, the liability issues are appropriate for legislative action, as has happened in many other states, to consider more thoroughly the policy arguments and evidence. ¶ 78. Returning to the parties’ arguments, both plaintiffs and defendants contend that we have essentially decided this case with respect to the duty not to release, with plaintiffs relying upon the broad statement of duty in Peck and defendants relying upon the limitations on duty imposed by Sorge. We conclude that defendants have the stronger support of this aspect of the arguments. It would be difficult for us to reconcile the holding in Sorge with a holding that the Retreat had a duty not to release E.R. as a matter of public protection. In saying this, we specifically reject reliance on the Restatement (Third) of Torts § 41(b)(4)’s special rule for mental health professionals. We conclude that if mental health professionals have a broad duty of public protection to institutionalize patients who may be dangerous, child protection workers would have a similar duty to institutionalize a juvenile who may be dangerous to the public. Our decision in Sorge rejects such a duty. ¶ 79. We are also reluctant to impose on mental health professionals a duty to third persons generally to seek to prevent the release of a voluntary patient. We are concerned by the broad scope of such a duty and its consequences on the mental health system. See 18 V.S.A. § 7251(3); In re R.L., 163 Vt. 168, 173, 657 A.2d 180, 184 (1995) (stating that this Court requires consideration of voluntary alternatives first before resorting to involuntary order because involuntary treatment for mental illness is massive curtailment of liberty often resulting in social stigmatization). In Sorge, we recognized the conflict between the state’s obligation to rehabilitate the juvenile involved and the obligation to protect the public. 171 Vt. at 177, 762 A.2d at 820. 39 We resolved that conflict decisively in favor of rehabilitation in a noninstitutional setting. Consistent with Sorge, we must resolve the conflict in the same way here. Thus, we elect not to impose a duty. ¶ 80. We also reject on narrower grounds plaintiffs’ claim that defendant Brattleboro Retreat can be liable for negligent performance of an undertaking under § 324A of the Restatement (Second) of Torts. That section requires plaintiffs to show one of three circumstances. The only one possibly applicable in this case is § 324A(a): that defendants’ “failure to exercise reasonable care increases the risk of such harm.” The standard of comparison for this subsection is not the risk of harm created if defendant exercised reasonable care, as under that standard the element would always be met. Instead, the standard is the risk of harm that would be present if defendant never undertook to render the services. Plaintiffs cannot show, and do not allege, that defendant’s care increased the risk to third persons. Sentry v. Murphy Ins., 2014 VT 25, ¶ 28, 196 Vt. 92, 95 A.3d 985.14 Therefore, § 324A does not apply. ¶ 81. Finally, our holding on these counts of the complaint against the Retreat apply equally against NKHS, the outpatient service provider. Indeed, courts have held that duties to control are lesser in outpatient programs because the ability to control the behavior of the patient is more limited. See Santana v. Rainbow Cleaners, 969 A.2d 653, 665-66 (R.I. 2009). Plaintiffs alleged in Count VI that NKHS had a duty to treat E.R. such that the risk of harm to the public would be reduced. We decline to impose such a duty. For the reason expressed above with respect to the Retreat, we hold that Restatement (Second) of Torts § 324A does not impose a duty to the public on NKHS to exercise reasonable care in its undertaking to provide services to E.R. ¶ 82. We emphasize the narrowness of our ruling today. The question before us in connection with this motion to dismiss is whether we can conclude beyond doubt that “there exist 14 This point is now explicitly recognized in the comparable section of the Restatement (Third) of Torts § 43. 40 no facts or circumstances that would entitle the plaintiff to relief.” Bethel v. Mount Anthony Union High Sch. Dist., 173 Vt. 633, 634, 795 A.2d 1215, 1217 (2002) (mem.) (quotations omitted). Even applying this liberal standard, we have concluded that defendants had no duty enforceable by a third party to treat E.R., to seek involuntary commitment of E.R., or to adopt a particular discharge plan. The only potential duty we recognize in this case, as in Peck, involves a duty to provide certain information in a specific class of cases. That duty applies when a caregiver is actively engaging with the patient’s provider in connection with the patient’s care, the patient’s treatment plan (or in this case, discharge plan) substantially relies on that caregiver’s ongoing participation, and the caregiver is himself or herself within the zone of danger of the patient’s violent propensities.15 The information to be conveyed is reasonable information to notify the caregiver of the risks, and of steps he or she can take to mitigate the risks. This duty is, in turn, limited by HIPAA and any other applicable statute restricting such disclosures. A provider has no duty to convey any information in violation of HIPAA.16 ¶ 83. We also note the significant obstacles this and similar claims face. In addition to proving the necessary facts to establish the limited duty recognized above, plaintiffs here will have to establish the content of the reasonable disclosure, and a failure to provide that information. Not only must plaintiffs prove duty and breach, they will have to prove causation—that any failure to inform they can prove was more likely than not a but-for cause of their injuries. ¶ 84. In summary, we hold that counts II and V of plaintiffs’ complaint (the “failure to warn” counts), as construed to include elements of count III (the “failure to train” count that was 15 The caregiver need not be formally charged with legal responsibility for the patient, as in a guardianship. The fact that the treatment plan relies on the participation of the caregiver, even if the caregiver has no legal responsibility for or authority over the patient, is sufficient to trigger a duty to inform. 16 Exceptions to the general rule of nondisclosure under HIPAA may include disclosures the provider believes in good faith are necessary to prevent or lessen a serious and imminent threat to the health or safety of a person or the public to a person reasonably able to lessen that threat, 45 C.F.R. 164.512(j), as well as information conveyed with the patient’s consent or pursuant to a valid authorization. Id. § 164.506(b) (consent); id. § 164.508(a) (authorization). 41 otherwise properly dismissed) state causes of action that survive a motion to dismiss. In all other respects, the motion to dismiss was properly granted. As discussed in the foregoing paragraphs, we do not adopt § 43 of the Restatement (Third) of Torts. Affirmed on plaintiffs’ failure-to-treat and negligent-undertaking claims. Reversed and remanded on the failure-to-inform claims. FOR THE COURT: Associate Justice ¶ 85. REIBER, C.J., dissenting. Chief Justice Roger Traynor of the California Supreme Court, one of the great common-law innovators in American legal history, nevertheless repeatedly cautioned restraint, or what he called “circumspection,” in the evolution of judicial precedent. “The greatest judges of the common law have proceeded in this way,” he explained, “moving not by fits and starts, but at the pace of a tortoise that explores every inch of the way, steadily making advances though it carries the past on its back.”17 Unlike a legislature, whose scope of inquiry is unbounded, an appellate court is confined to the record, which in turn is limited by the rules of evidence, and its decisions—unlike statutes—become instantly resistant to change under the rule of stare decisis. Hence the overarching need for judicial humility in the face of our own limited knowledge—for incremental rulings that allow a court “time to advance or retreat” from its forays into the unknown with a minimum of unintended effects and needless shock to those who must “act in reliance upon judicial pronouncements.”18 ¶ 86. The majority abandons this cautious approach with no apparent awareness that it is even doing so. It dresses its decision in the clothes of the “modern,” suggesting that its holding flows from a natural “evolution of the duties articulated in decades of case law” and thus represents 17 R. Traynor, Transatlantic Reflections on Leeways and Limits of Appellate Courts, 1980 Utah L. Rev. 255, reprinted in The Traynor Reader 200 (1987). 18 Traynor, supra, at 200. 42 no dramatic departure. Ante, ¶¶ 21, 23, 38. It embraces these “precedent[s] and modern trends” to define for mental-health care providers a new common-law duty. Ante, ¶ 51. ¶ 87. But the argument is a fiction. Science and the law have indeed evolved in the forty years since the California Supreme Court’s seminal decision in Tarasoff v. Regents of University of California that a therapist who “determines, or pursuant to the standards of his profession should determine, that his patient presents a serious danger of violence to another, . . . incurs an obligation to use reasonable care to protect the intended victim against such danger.” 551 P.3d 334, 340 (Cal. 1976). They have simply not evolved in any way that remotely supports the majority’s decision to expand exponentially the duty owed by a mental health professional to protect third parties in the circumstances presented here. Accordingly, I must respectfully dissent. ¶ 88. The majority observes at the outset that since Tarasoff “several courts have limited the duty to identifiable victims, or a class of individuals whose injury is foreseeable because of their relationship or proximity to a specifically identifiable victim.” Ante, ¶ 36 (emphasis added). Among these, of course, is our own holding in Peck v. Counseling Service of Addison County, Inc. that “a mental health professional who knows or, based upon the standards of the mental health profession, should know that his or her patient poses a serious risk of danger to an identifiable victim has a duty to exercise reasonable care to protect him or her from that danger.” 146 Vt. 61, 68, 499 A.2d 422, 427 (1985). “However,” the majority continues, “several other courts have held that a duty to warn is owed not only to specifically identified or identifiable victims, but to foreseeable victims or to those whose membership in a particular class . . . places them within a zone of danger.” Ante, ¶ 37. Combined with the suggestion that “Peck was decided thirty years ago, before modern trends in this area,” ante, ¶ 38 (emphasis added), the implication is that the states are now about evenly divided between these camps. ¶ 89. This is decidedly not the case. The voluminous literature canvassing the legal and medical ramifications of Tarasoff over the past four decades agree that the predominant legal response has been to specifically define and limit a mental health provider’s duty to protect third 43 parties, generally requiring a serious threat to a readily identifiable victim. See, e.g., D. Katner, Confidentiality and Juvenile Mental Health Records in Dependency Proceedings, 12 Wm. & Mary Bill of Rt. J. 511, 532 (2004) (Although “most jurisdictions now recognize a Tarasoff-type duty, the vast majority . . . limit it to situations in which . . . the patient has communicated to the psychotherapist a serious threat of physical violence against a reasonably identifiable victim or victims.” (quotations omitted)); C. Cantu, et al., Bitter Medicine: A Critical Look at the Mental Health Care Provider’s Duty to Warn in Texas, 31 St. Mary’s L.J. 359, 377 (2000) (“The majority of states that have addressed this issue follow the Tarasoff/Thompson rule, which states that when a mental health care provider foresees or should foresee that a patent poses a serious risk of violence to a readily identifiable third person, a duty arises to use reasonable care to protect that individual against the danger.”).19 See also Fraser v. United States, 674 A.2d 811, 816 (Conn. 1996) (noting that “state courts . . . have overwhelmingly concluded that an unidentifiable victim has no claim in negligence against psychotherapists who were treating the assailant on an outpatient basis”); Eckhardt v. Kirts, 534 N.E.2d 1339, 1344 (Ill. App. Ct. 1989) (observing that, in “determin[ing] the legal duty of therapists to third persons, numerous courts have concluded that a therapist cannot be held liable for injuries inflicted upon third persons absent specific threats to a readily identifiable victim”).20 19 In Thompson v. County of Alameda, 614 P.2d 728, 734 (Cal. 1980), the California Supreme Court clarified Tarasoff by explaining that a therapist’s duty to protect arises only when the patient’s intended victim is “readily identifiable.” “[N]onspecific threats of harm against nonspecific victims” do not trigger the duty of care. Id. at 735. 20 As discussed more fully below, a few courts have expanded the duty slightly to include persons within a “zone of danger” who were sufficiently targeted by the patient even if not specifically threatened. See, e.g., Jablonski v. United States, 712 F.2d 391, 398 (9th Cir. 1983) (applying California law and Tarasoff to hold that, although defendant’s patient had made no express threat against his domestic partner, Melinda Kimball, she was within scope of duty where patient’s “previous history indicated that he would likely direct his violence against Kimball,” his psychological profile “indicated that his violence was likely to be directed against women very close to him,” and he had threatened Kimball’s mother), overruled on other grounds by In re McLinn, 739 F.2d 1395 (9th Cir. 1984 (en banc); Hamman v. Cty. of Maricopa, 775 P.2d 1122, 1127-28 (Ariz. 1989) (holding that “Tarasoff envisioned a broader scope” of duty than circumstance where patient “verbalized [a] specific threat,” and could include patient’s family 44 ¶ 90. The reason is readily apparent. Courts and legislatures from Tarasoff onward have recognized the conflicting interests at play in such cases and the freighted consequences however the balance is struck. On one side is the obvious and compelling interest in protecting the public from assault by mental health patients with violent propensities. On the other is the strong countervailing interest in safeguarding the confidential character of psychotherapeutic communications,21 the inherent difficulty (often underappreciated by those with the luxury of hindsight) of forecasting future dangerousness,22 and the significant societal concern that patients not be unnecessarily hospitalized as a means to avoid liability. 23 See, e.g., Estates of Morgan v. Fairfield Family Counseling Ctr., 1997-Ohio-194, 673 N.E.2d 1311, 1322 (listing the factors where his threats placed them “within the zone of danger, that is, subject to probable risk of the patient’s violent conduct”); see also Fraser, 674 A.2d at 816 (noting that most courts have extended therapist’s duty of care only to “victims who were either specifically identifiable or within a class of foreseeable victims”). 21 See, e.g., D. Rosenhan, et al., Warning Third Parties: The Ripple Effects of Tarasoff, 24 P. L. J. 1165, 1222 (1993) (concluding, based on survey of mental health providers, that in accordance with Tarasoff “psychotherapists continue to warn patients that certain conversation is not confidential,” and “in accord with expectation, many of these patients simply abandon treatment,” posing additional risks to the public). 22 The clinical difficulties in (1) assessing the risk of violence posed by a patient and (2) determining whether that risk is sufficient to warrant protective actions, recognized in Tarasoff, have not appreciably lessened in the decades since. See, e.g., D. Mossman, Critique of Pure Risk Assessment, or Kant Meets Tarasoff, 75 U. Cin. L. Rev. 523, 601-02 (2006) (explaining that clinicians do not “predict dangerousness” but simply identify different “levels of risk,” and that more significantly few empirical studies reveal “what level of risk is sufficient to justify . . . action”); P. Herbert, The Duty to Warn: A Reconsideration and Critique, 30 J. Am. Acad. of Psychiatry & Law 417, 421 (2002) (observing that, “despite advances in risk assessment,” such assessments fall “substantially short of exact science” and involve at best “approximations of the degree of risk”). 23 This concern was cogently summarized by the court in Sherrill v. Wilson, 653 S.W.2d 661, 664 (Mo. 1983): The plaintiff could undoubtedly find qualified psychiatrists who would testify that the treating physicians exercised negligent judgment, especially when they are fortified by hindsight. The effect would be fairly predictable. The treating physicians would indulge every presumption in favor of further restraint, out of fear of being sued. Such a climate is not in the public interest. 45 generally considered in determining a therapist’s duty of care as including “the public’s interest in safety from violent assault,” the “difficulty inherent in attempting to forecast whether a patient represents a substantial risk of physical harm to others,” the “goal of placing the mental patient in the least restrictive environment . . . free from unnecessary confinement,” and the “social importance of maintaining the confidential nature of psychotherapeutic communications”). ¶ 91. A few states, weighing these countervailing concerns, have determined that public policy simply does not support the imposition of any duty upon a mental health care provider to protect third parties from a potentially violent patient. See Boynton v. Burglass, 590 So. 2d 446, 448 (Fla. Dist. Ct. App. 1991) (rejecting Tarasoff-like duty to warn identified third parties of threats by patient on the ground that it is “neither reasonable nor workable and is potentially fatal to effective patient-therapist relationships”); Thapar v. Zezulka, 994 S.W.2d 635, 640 (Tex. 1999) (declining “to impose a common law duty on mental-health professionals to warn third parties of their patient’s threats”). ¶ 92. Several other courts have taken the opposite tack, broadly defining the therapist’s duty to include any “foreseeable” victim without limitation to specifically identified or identifiable targets of violence. See Lipari v. Sears, Roebuck & Co., 497 F. Supp. 185, 194 (D. Neb. 1980); Naidu v. Laird, 539 A.2d 1064, 1072-73 (Del. 1988); Petersen v. State, 671 P.2d 230, 237 (Wash. 1983); Schuster v. Altenberg, 424 N.W.2d 159, 166 (Wis. 1988). Significantly, however, these decisions have generally rested on the courts’ recognition of a corollary duty to control a violent patient through involuntary commitment if necessary. See Lipari, 497 F. Supp. at 193-94 (holding that therapist’s duty includes “whatever precautions are reasonably necessary to protect potential victims of his patient,” including “duty to detain a patient” in hospital); Naidu, 539 A.2d at 1073 (holding that defendants had duty to warn “and a duty to control the actions of a mentally ill patient” and were negligent in discharging patient from hospital); Petersen, 671 P.2d at 237 (upholding judgment for plaintiff based on psychiatrist’s failure “to petition the court for a 90-day commitment, as he could have done . . . to protect those who might foreseeably be endangered”); 46 Schuster, 424 N.W.2d at 166 (rejecting defendant’s claim that they did not “have a duty to warn third parties or to institute proceedings for the detention or commitment of a dangerous individual for the protection of the patient or the public”). See generally M. Quattrocchi, Tarasaurus Rex: A Standard of Care that Could Not Adapt, 11 Psychol. Pub. Pol’y & L. 109, 113 (2005) (“Some courts have imposed a duty to third parties in the absence of an identifiable victim. These cases emphasize . . . protection in the form of hospital confinement.”); R. Schopp, The Psychotherapist’s Duty to Protect the Public: The Appropriate Standard and the Foundation in Legal Theory and Empirical Premises, 70 Neb. L. Rev. 327, 345 (1991) (noting that “the Schuster court interpreted warnings and civil commitment as comparable techniques for protecting the public from foreseeable harm”). ¶ 93. Thus, those courts that have broadened the therapist’s duty to all “foreseeable” victims without limitation have resolved the dilemma posed by the risk of over-commitment essentially by ignoring it; under these rulings, anyone injured by a mental health patient may argue that, in retrospect, the therapist was negligent in failing to detain the patient. In states like Vermont, however, where public policy militates against the recognition of a duty to control a patient through involuntary hospitalization—a policy reaffirmed by the majority today—extending the duty to the public at large is not a sound or practical option. See ante, ¶ 77 (rejecting imposition of duty to institutionalize mental health patient in order to avoid “an increase in unjustified commitments and abandonment of treatment-in-the-least-restrictive-environment” policy). ¶ 94. Most states, as noted, have pursued an approach between these two extremes. Through case law or legislation they have struck a balance among the competing concerns by recognizing a relatively narrow duty of care limited to situations where the therapist knows or should know that a patient poses a specific threat to an identified or reasonably identifiable third person. This standard, as one court has observed, “evinces a sound public policy against expanding the liability of health professionals to an indeterminate class of potential plaintiffs.” Eckhardt, 534 N.E.2d at 1345. It reflects a considered policy judgment that the societal costs of breaching the 47 therapeutic bond based on generalized threats of violence—all too commonplace in the therapeutic setting24—do not justify whatever uncertain benefits may flow from expanding the duty to unspecified third parties based on an inherently inexact risk assessment made all the more difficult where the potential target is not identified. See, e.g., Thompson, 614 P.2d at 736 (observing that “it is fair to conclude that warnings given discreetly and to a limited number of persons would have a greater effect because they would alert [them] . . . of a specific threat pointed at them”). ¶ 95. This balancing of interests was cogently addressed by the Pennsylvania Supreme Court in considering “the conundrum a mental health care professional faces regarding the competing concerns of productive therapy, confidentiality and other aspects of the patient’s wellbeing, as well as the interest in public safety.” Emerich v. Phila. Ctr. for Human Dev., Inc., 720 A.2d 1032, 1040 (Pa. 1998). In light of these concerns, the court concluded that the circumstances giving rise to a duty to third parties must necessarily be “limited,” requiring “the existence of a specific and immediate threat” which is “made against a specifically identified or readily identifiable victim.” Id. “Strong reasons,” the court concluded, compel the conclusion that the therapist’s duty “must have some limits.” Id. Many other courts have echoed these concerns in reaching similar conclusions. See, e.g., Fraser, 674 A.2d at 816 (adopting rule that therapist’s duty to protect third persons is limited to identifiable victims or class of identifiable victims based on “balance [of] the interests of those injured by psychiatric outpatients against the interests of the mental health profession in honoring the confidentiality of the patient-therapist relationship and in respecting the humanitarian and due process concerns that limit the involuntary hospitalization of the mentally ill” (citation omitted)); Eckhardt, 534 N.E.2d at 873-74 (rejecting expansion of therapist’s duty beyond “cases involving specifically identifiable, potential victims as evidenced by specific threats” because “[h]uman behavior is simply too unpredictable and the field of 24 See Herbert, supra, at 422 (explaining that “mental health workers must grapple with threats of suicide or of violence against others regularly as an integral part of their work,” and that such threats “are daily grist”) 48 psychotherapy presently too inexact,” and imposition of a broader duty “would be to place an unacceptably severe burden on those who provide mental health care to the people of this State, ultimately reducing the opportunities for needed care”). In addition, as noted, numerous states have codified similar, practical limits on a mental-health care provider’s duty of care to third parties. See D. Mossman, Critique of Pure Risk Assessment, or Kant Meets Tarasoff, 75 U. Cin. L. Rev. 523, 586 n.204 (2006) (observing that, “[t]o clarify clinicians’ responsibilities, many states have enacted laws that limit therapists’ potential liability if they take specified actions when a patient makes a serious threat against an identifiable victim” (quotation omitted)); Nat’l Conference of State Legislatures, Mental Health Professionals’ Duty to Warn, www.ncsl.org/research/health/mental-health-professonals-duty-to-warn.aspx (2015) (collecting state statutes). ¶ 96. The point here is not that the Court has adopted a minority position without expressly acknowledging it. If that were the problem, it would be enough to simply articulate the competing viewpoint, and agree to disagree. However ill-advised the majority’s choice, it would at least be based on familiar ground. And while the decision to abandon a standard that so many states have found to be the proper balance between competing public-policy interests might be mistaken, it would at least have the virtue of transparency. ¶ 97. The problem here is altogether different, however, and far more serious. For the majority not only expands the scope of a therapist’s duty beyond the limits recognized by this Court in Peck, it creates an entirely new duty of care which plaintiffs here have labeled a duty to “train” and the majority sees fit to recast as “a duty to ‘inform’ that incorporates some elements of what plaintiffs describe as a distinct duty to ‘train.’ ” Ante, ¶ 53. Elsewhere, the majority variously describe this as: “a duty to provide reasonable information to the parents to enable them to recognize the dangers and fulfill the responsibilities envisioned for them in the treatment plan,” ante, ¶ 44; a duty that “contemplates more than simply advising the parents that their son posed a risk,” but also providing “reasonable information . . . to help keep their son safe,” ante, ¶ 53; and 49 a duty to notify the caregiver of the risks “and of the steps he or she can take to mitigate the risks,” ante, ¶ 82. ¶ 98. If mental-health care providers, patients and their families, and the legal counsel who advise them remain uncertain as to the precise nature and scope of this new duty, they are to be forgiven. For the Court is making this up as it goes, with no input from the mental health profession on whether standards even exist for such a duty. This is not an easy task. But the real difficulty lies ahead, when this Court has moved on and the mental health care community must continue to grapple with the implications. ¶ 99. For make no mistake, this holding is extraordinary in its scope and implications. To recall, most duty-to-protect cases have divided along a fault-line between those limiting the duty to identified or reasonably identifiable targets of violence and those that would include all “foreseeable” victims, the latter generally predicated on a duty to treat and, if necessary, confine a dangerous patient given the general impracticality of warning all remote, albeit foreseeable victims. The majority rejects the principle that a therapist’s duty extends only to reasonably identifiable targets of specific threats by the patient. It also rejects as a matter of policy any duty to control a mental-health patient through involuntary commitment. Ante, ¶ 79. ¶ 100. Out of this seeming impasse the majority creates a new duty—a duty to warn not the patient or the patient’s targeted victims, but the patient’s parents or, more broadly, his or her “caretakers” so that they may control the patient and prevent injury to the public. . This is worth a moment’s reflection. As a matter of policy, according to the majority, no liability may attach to E.R.’s mental health providers for their allegedly negligent failure to control E.R.’s conduct by providing for his involuntary commitment. Nevertheless, liability may attach to the same defendants for their allegedly negligent failure to enable E.R.’s parents to control his conduct by providing them with adequate warning and information to “mitigate the risks.” Ante, ¶ 82. ¶ 101. The imposition of a duty so novel and with such potentially broad consequences for mental health care providers, their patients, and the general public surely requires a more solid 50 foundation than an allegation in a complaint. Recognizing that this case remains at the pleading stage, duty nevertheless constitutes an essential element of plaintiffs’ cause of action, and its existence is a question of law which this Court must decide in the first instance in light of all relevant policy concerns. See Endres v. Endres, 2008 VT 124, ¶ 11, 185 Vt. 63, 968 A.2d 336 (noting that “duty . . . is central to a negligence claim” and that “its existence is primarily a question of law” based on “those considerations of policy which lead the law to say that the plaintiff is entitled to protection” (quotation omitted)). Yet nothing in plaintiffs’ complaint even remotely identifies the basis for recognizing a so-called duty to “inform” a patient’s parents or “caretakers” to protect the public. Nothing in plaintiffs’ briefing below or before this Court identifies any medical treatises or other literature defining and describing the basic clinical standards, practices, and therapeutic goals underlying such a duty. Nothing in the briefing identifies any decisional law or authority elsewhere specifically recognizing and imposing such a duty. ¶ 102. We do, on the other hand, know from plaintiffs’ complaint that certain actions were taken by defendants after E.R.’s discharge. We know that the Brattleboro Retreat made an aftercare treatment plan for E.R. and reviewed it with E.R. and his parents, and that the plan “involved E.R. being seen on a regular basis” at NKHS. We know that the medical professionals at the Retreat prescribed medications for E.R. to take on a daily basis. We know that E.R. met with a “treatment team” at NKHS, and that a “cognitive remediation therapy” plan was put in place and signed by E.R. We know that E.R told his mother in mid-December 2010 that he had ceased taking his medications, and that she reported this to NKHS. And we know that, on the day of the assault, E.R.’s father had taken E.R. with him to oversee work being done at an apartment building owned by E.R.’s grandfather. ¶ 103. These facts themselves, hardly unique, highlight the most significant deficiency in the majority’s newfound duty. Even assuming that plaintiffs could establish through expert evidence some professional standards for the duty owed to a patient’s caretaker, the imposition of such a duty demands consideration of the policy implications underlying it—its practical benefits 51 against its societal costs. See Langle v. Kurkul, 146 Vt. 513, 519, 510 A.2d 1301, 1305 (1986) (noting that existence of duty is primarily question of law dependent on variety of policy concerns, including “the closeness of the connection between the defendant’s conduct and the injury suffered,” the “burden to the defendant,” and the “consequences to the community” (quotation omitted)). ¶ 104. The facts alleged by plaintiffs show that, even with the practical steps undertaken by defendants and E.R.’s parents to facilitate his functioning safely in a less restrictive environment than a closed hospital ward—providing an aftercare plan and reviewing it with E.R.’s parents, establishing an outpatient treatment team, prescribing him daily medication, endeavoring to monitor his activity by taking him to job sites, and reporting that he had stopped his medication—they could not prevent him from perpetrating a spontaneous act of violence. ¶ 105. The majority’s speculation that defendants might have provided some additional “information” to E.R.’s parents to prevent the assault simply misses the point. To impose such a duty on health care providers undermines the fundamental policy underlying our mental health care system, a policy designed to maximize a patient’s freedom and dignity by providing treatment in the least restrictive environment available. It is the same policy resoundingly reaffirmed by the majority today in refusing to impose a tort duty on health care providers to institutionalize a patient. See ante, ¶ 77 (rejecting duty to institutionalize mental health patient to avoid “an increase in unjustified commitments and abandonment of treatment-in-the-least-restrictive-environment” policy). ¶ 106. Uncertainty counsels caution, for courts and clinicians alike. Any responsible mental health care provider uncertain as to how, if at all, to satisfy this new, amorphous duty to train or assist a patient’s “caretaker” sufficiently to prevent future harm might understandably decide to err on the side of a more—rather than a less—restrictive treatment setting rather than risk a lawsuit by the random victim of an outpatient assault. Moreover, considering the many adult patients living with someone who could be characterized as a “caretaker”—be it the patient’s 52 parents, spouse, domestic partner, or friend—the consequences of such decisions could be far reaching. Balanced against the dubious odds of actually predicting, much less preventing, random acts of violence by a patient absent any specific threat or identifiable victim, the risk becomes prohibitive. ¶ 107. The expected response to these concerns is that they are merely “speculative” while we know—in contrast—that mental health providers routinely make predictions of dangerousness in deciding to commit a patient and routinely apply Tarasoff when deciding whether a patient poses a threat. Thus, it is easy to posit that the concern for overcommitment is exaggerated or unfounded, that no responsible mental health care provider would involuntarily hospitalize a nondangerous patient to avoid a lawsuit, much less release a dangerous one despite the risk to the public. ¶ 108. The flaw in this response is the assumption that there are “yes” or “no” answers to the mental health clinician’s decisions. The relevant medical and legal literature, however, belies this assumption. There are, in fact, no answers, but only imperfect assessments of differential levels of risk, and there are no clear standards defining the level of risk sufficient to trigger protective measures. See, e.g., Mossman, supra, 75 U. Cin. L. Rev. at 567, 577 (observing that most recent medical studies show that “a therapist’s predictive knowledge about future violence is really an ability to make risk estimates,” while “there is and can be no rationally established, broadly accepted criterion for what probability of risk constitutes the level of ‘serious danger’ that should trigger a protective response”); Herbert, supra, 30 J. Am. Acad. of Psychiatry & Law at 422 (noting the “residuum of uncertainty” in assessing whether “a patient really means particular words as a threat”). Tarasoff has worked, according to surveys and studies, because most states employ reasonably clear, narrow, and understandable standards that require a serious threat to a reasonably identifiable target. See, e.g., Rosenhan, supra, 24 P. L.J. at 1203, 1208, 1217 (findings from broad survey of psychotherapists showed that, while very small percentage rated their ability to assess dangerousness “very accurately,” most understood duty to protect was predicated on identification of specific victim and believed that duty was consistent with ethical 53 obligations); Mossman, supra, 75 U. Cin. L. Rev. at 603 (noting that clinicians have sought and been well served by “statutory boundaries on the duty to protect, boundaries that tell them when the duty arises (usually, following explicit threats toward specific targets) and that define the ways of discharging the duty”); M. Soulier, et al., Status of the Psychiatric Duty to Protect, Circa 2006, 38 J. Am. Acad. of Psychiatry & Law 457, 471-72 (2010) (concluding from surveys of psychotherapists and review of legal evolution of Tarasoff duty that “statutes appear to promote a useful social policy, limiting the duty to protect to cases in which victims are identified or reasonably identifiable” and as such pose little threat to clinician’s ability to practice). The broad duty created by the majority, in contrast, contains none of the limits that form a natural and necessary counterbalance to the risks of defensive practice and overcommitment in the mental- health context. ¶ 109. To dismiss the concerns of the mental health care profession in this case as speculative or even self-serving, moreover, is presumptuous. It is all too easy to assign new duties to a profession we know little about, and have no responsibility to implement. Judicial restraint in creating duties for other professions is not an end in itself; it is the end-result of recognizing our own limitations. It is wisdom grounded in humility. ¶ 110. The majority ultimately attempts to minimize its decision’s impact by noting the “significant obstacles” in the way of any successful lawsuit, including the plaintiffs’ need to prove the “necessary facts,” a “failure to disclose the necessary information,” as well as “causation— that any failure to inform . . . was more likely than not a but-for cause of their injuries.” Ante, ¶ 83. This may reassure the majority, but it is cold comfort to the mental health-care providers and their colleagues and families compelled to endure the personal and professional disruptions, stress, and financial burdens of protracted lawsuits predicated on this amorphous new duty, regardless of their ultimate success. ¶ 111. Finally, I would note that the majority’s alternative basis for imposing a duty of care predicated on its conclusion that “E.R.’s parents fell within the ‘zone of danger’ from E.R.’s 54 conduct” is equally flawed and unpersuasive. Ante, ¶ 47. The zone-of-danger doctrine, as noted, simply extends the therapist’s duty to persons within a finite class of reasonably identifiable potential targets. Thus, in the case cited by the majority, Hamman v. County of Maricopa, the record showed that the patient had “expressed jealousy of his stepfather” to the therapist; that the patient’s parents had expressed concern to the therapist for their safety and begged the therapist to admit the patient to the hospital; that the therapist failed to do so; and that the patient subsequently attacked his stepfather with an electric drill. 775 P.2d at 1123-24. Based on these facts, the court reasonably concluded that, despite the absence of a specific verbalized threat against the parents, “they were readily identifiable persons who might suffer harm.” Id. at 1128. ¶ 112. Despite the majority’s statement that it “find[s] Hamman persuasive and follow[s] its reasoning,” ante, ¶ 49, nothing on the limited factual record here brings this case within the “zone of danger” doctrine articulated in Hamman and elsewhere. First, the complaint did not allege that E.R. had threatened either his parents or a class of persons that might reasonably be construed to include his parents.25 Nor did plaintiffs claim, as the majority argues, that E.R.’s earlier aggression toward a member of the staff at the Retreat somehow brought E.R.’s parents into the zone of danger applicable to all “caretakers.” To suggest that a threat against a nurse, therapist, physician or other mental health care provider somehow represents a threat against an identifiable class of all family members and friends who help with the patient’s outpatient care would stretch the “zone of danger” doctrine beyond recognition. ¶ 113. Second, and more significantly, the doctrine was designed to protect a slightly expanded class of reasonably identifiable potential victims, and E.R.’s parents were not the victims here. As noted, plaintiffs did not allege any threats—explicit, implicit, or otherwise—against his parents. Nor is there any factual basis to support a conclusion that the actual victim, Mr. Kuligoski, 25 At the motion hearing, plaintiffs’ counsel readily conceded that “there was no identifiable victim” in this case. 55 was within an identified or identifiable class of potential victims. The “zone of danger” argument thus fails entirely. ¶ 114. This Court has repeatedly cautioned against placing “our imprimatur” upon a new legal duty “without first determining whether there is a compelling public policy reason for the change.” Langle, 146 Vt. at 520, 510 A.2d at 1306; accord Goodby v. Vetpharm, Inc., 2009 VT 52, ¶ 11, 186 Vt. 63, 974 A.2d 1269; Knight v. Rower, 170 Vt. 96, 107, 742 A.2d 1237, 1245 (1999); Smith v. Luman, 148 Vt. 595, 599, 538 A.2d 157, 158 (1987). The majority identifies no compelling public policies to warrant the extraordinary duty it imposes on mental health care providers by today’s ruling. On the contrary, settled public policy governing our treatment of the mentally ill demands precisely the opposite result. I therefore respectfully dissent. ¶ 115. I am authorized to state that Justice Skoglund joins this dissent. Chief Justice ¶ 116. SKOGLUND, J., dissenting. I concur in the Chief Justice’s well-reasoned, indeed unassailable, dissent. The majority has created a heretofore unheard of duty based on an allegation in a complaint. This new duty to train or assist or inform a patient’s caretakers so as to protect the public finds no support in case law or public policy. It is illogical, potentially fatal to effective patient-therapist relationships, and places an impossibly onerous obligation on those who provide mental health care to the people of this state. ¶ 117. The facts of this case center around an unprovoked, spontaneous act of violence directed against a stranger by an individual suffering from a serious mental illness. Nothing short of anticipatory confinement in a hospital could have prevented it. But now, severely crippling Vermont’s public policy of treatment of the mentally ill in the least restrictive environment, the majority has delivered a cautionary tale involving the threat of tort liability for releasing a mentally 56 ill person to people not sufficiently warned/trained to provide care and control. This is a preposterous, reckless decision. ¶ 118. The majority opinion identifies the cautious and thoughtful evolution of the duty owed by mental health professionals begun in Tarasoff v. Regents of University of California, 551 P.2d 334 (Cal. 1976), Thompson v. County of Alameda, 614 P.2d 728 (Cal. 1980), and the cases that came after. It then abruptly abandons consideration of identified victims or reasonably identifiable victims and finds a duty “to warn E.R.’s parents as individuals in the ‘zone of danger’ of E.R.’s dangerous propensities.” Ante, ¶ 52. However, in the same paragraph it limits the duty only to those who are engaged with the patient’s treatment, not those that simply live with him. Ante, ¶ 52. That “zone” is flexible, fluid and ambiguous. ¶ 119. First of all, I posit that the parents of E.R. knew he could be dangerous as it was his behaviors in their home that precipitated his initial hospitalization. They were privy to the discharge summary from the Brattleboro Retreat and worked with the Retreat to develop an aftercare treatment plan that included regular visits to Northeast Kingdom Human Services (NKHS). They were aware he was on antipsychotic medications and had been told that they should give E.R. his medications and not rely on him to medicate himself. The mother knew enough to be concerned when E.R. told her he had stopped taking his medication. They had been warned. They knew E.R. could be dangerous when deep in his illness. What further warning should have been offered remains a mystery. ¶ 120. What is substantially more troubling is the framework upon which the majority builds its new duty. As explained by the Chief Justice in his dissent, the majority relies on the “zone-of-danger” doctrine that simply is not implicated in this case. There is no allegation E.R. threatened his parents. The parents were not injured. And, the actual victim could not have been identified as a reasonably identifiable potential victim, the expanded class the doctrine is designed to protect. 57 ¶ 121. The majority finds Hamman v. County of Maricopa, 775 P.2d 1122 (Ariz. 1989), “persuasive” and claims to follow its reasoning. The Hamman case is completely distinguishable from the case at bar. In Hamman, the doctor refused to admit the patient to the hospital and, according to the parents, told them their son was “harmless.” Id. at 1123. Two days later, the son viciously attacked the stepfather. The court noted that the doctor was aware that schizophrenic- psychotic patients are prone to unexpected episodes of violence, knew that the son was living with his parents, and thus should have known that “[i]f indeed [the doctor] negligently diagnosed [the son] as harmless, the most likely affected victims would be the Hammans. Their constant physical proximity to [their son] placed them in an obvious zone of danger. The Hammans were readily identifiable persons who might suffer harm if the psychiatrist was negligent in the diagnosis or treatment of the patient.” Id. at 1128. The majority neglects to provide any analysis to link the case at bar with the situation described in Hamman. ¶ 122. Under this new duty, mental health providers will have to consider generalized threats of violence directed against no one in particular, which I suggest are commonplace with severely ill patients, and will have to weigh whether to violate the patient-physician privilege, thus damaging whatever therapeutic relationship existed and perhaps the treatment of the patient as well. After the risk assessment, they will then, in trying to place the patient in the least restrictive environment available, need to do an educational assessment of potential caregivers. As the Chief Justice notes, the majority identifies no professional standards, legal authority, or public policies to support a duty so “extraordinary in its scope and implications.” Ante, ¶ 99. Long after this Court has forgotten about it, this amorphous duty to train or assist will continue to perplex and bedevil practitioners in the field of mental health who must actually attempt to understand the obligations imposed and comply. ¶ 123. Finally, the majority disposes of statutes and regulations that govern confidential communications between patient and physician by suggesting that, one, they only codify an evidentiary privilege, and two, they do not prohibit disclosure to “caregivers” involved in the 58 patient’s aftercare plan. Ante, ¶ 61. This is a breathtaking disregard for the tort liabilities or ethical claims that can result from the disclosure of health information or history and a startling conclusion that no objection occurs to them for the wholesale disclosure of a person’s mental health condition and history to the ambiguous sobriquet “caretaker.” ¶ 124. The manner in which the majority disposes of the requirements of HIPAA’s Privacy Rule is rather cavalier. It notes two exceptions relevant to the disclosure obligation imposed in this decision. The first, the dangerous patient exception to the confidentiality requirement intended to “avert a serious threat to health or safety,” permits disclosure when the disclosure “is necessary to prevent or lessen a serious and imminent threat to the health or safety of a person or the public.” 45 C.F.R. 164.512(j). Relying on “E.R.’s propensity for violence,” the majority finds the subsection permits disclosure, ignoring the requirement that a perceived serious threat must be imminent. ¶ 125. The majority identifies a second useful exception, one providing for standard uses and disclosures for involvement in an individual’s care and notification purposes, citing to the provision for emergency circumstances. 45 C.F.R. 164.510(b)(3). The majority forgets to mention that the section’s primary application is for “Limited uses and disclosures when the individual is not present.” It then latches onto the conjunctive modifying language contained in the section, “[i]f the individual is not present, or the opportunity to agree or object to the use or disclosure cannot practicably be provided because of the individual’s incapacity or an emergency circumstance,” to support its dismissal of HIPPA concerns. I suggest that the section is intended to apply when “the individual’s incapacity” is of a sort that renders him unconscious. Again the majority finds the subsection permits disclosure. ¶ 126. Decisions to create and impose new legal duties on other learned professions have profound consequences. To impose a novel legal duty on mental health care professionals without extensive discussion of the professional knowledge, skills, and practice standards—if any—that 59 may apply and the policy consequences that may result, is not merely, as the Chief Justice suggests, “presumptuous.” It is the essence of judicial arrogance. Associate Justice 60	01-03-2023	09-17-2016

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